We compare two commonly used mechanisms in procurement: auctions and negotiations. The execution of the procurement mechanism is delegated to an agent of the buyer. The agent has private information about the buyer’s preferences and may collude with one of the sellers. We provide a precise...

Abstract We model a Hotelling market with multidimensional product differentiation in an evolutionary framework. Both evolutionary stability (in the sense of Schaffer, 1989) and stochastic stability (following [Kandori et al., 1993] and [Young, 1993]) are analyzed. It is shown that firms move...

Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing...

We extend the seminal Rothschild and Stiglitz (1976) model on competitive insurance markets with asymmetric information in the spirit of Wilson (1977)’s ‘anticipatory equilibrium’ by introducing an additional stage in which initial contracts can be withdrawn after observation of...

Surety bonds are instruments used in public and private procurement to avoid the problem of contractor bankruptcy. A surety company issuing such a bond guarantees to either finish the project itself or pay the bond to the procurement agency in case of contractor's bankruptcy. This situation is...

In this relatively short survey, we present the core elements of the microeconomic analysis of insurance markets at a level suitable for senior undergraduate and graduate economics students. The aim of this analysis is to understand how insurance markets work, what their fundamental economic...

We compare the effects of information acquisition during a descending auction with its static counterpart, the first-price sealed-bid auction. In a framework with heterogeneous prior information, we show that an equilibrium with information acquisition exists in both auction formats. We show...