Quality cut-offs in procurement auctions

- This paper looks at a procurement auction mechanism with endogenous quality cut-off.
- Continuous, symmetric, monotone equilibria do not exist in such an auction.
- Hence provides one explanation for using procurement auction mechanisms with pre-specified quality cut-off.

Recently the Government of India used procurement auction mechanisms with endogenously determined minimum quality. We find these auctions have no equilibrium in continuous symmetric monotonic pure strategies. This may substantiate the use of auction mechanisms with exogenously determined minimum quality.