Budget Constrained Procurement (with Alexandre Belloni, Leslie M. Marx and Roberto Steri)

Abstract:
We study optimal procurement mechanisms for a buyer who wishes to purchase a homogeneous product up to a maximum demand amount, has a fixed budget. We characterize optimal mechanisms for any number of suppliers when only the budget constraint is binding. When neither the budget nor the demand constraints can be ignored, we characterize the optimal mechanism for the case of two suppliers under regularity assumptions on the cost distribution. We also show that these optimal mechanisms have straightforward dynamic implementations.