Demand Based Procurement Pricing by Stephen Morris

Join us for another event in the Microeconomics Research Seminar Series, Autumn Term 2025.

Stephen Morris, from MIT, will present this week's Microeconomics Seminar on Demand Based Procurement Pricing.

Abstract

How should an organization design procurement mechanism when facing uncertainty about suppliers’ costs? We propose a class of simple mechanisms, constant surplus sharing mechanism, that only depend on the known demand of the buyer and do not refer to the unknown supply condition of the seller. We show that these mechanisms allow the buyer to realize a guaranteed positive fraction of the efficient social surplus. Hence, the ratio guarantee. Furthermore, a judicious choice of the sharing constant based on the known demand (and in particular the demand elasticity) maximize the ratio guarantee that can be attained across all possible (arbitrarily complex and nonlinear) mechanism. We obtain similar guarantees in terms of competitive ratios for related nonlinear pricing and optimal regulation problems.

This seminar will be held in the Economics Common Room on Monday 10 November at 4.00pm. This event is open to all levels of study and is also open to the public.

To register your place and gain access to the webinar, please contact the seminar organisers.

This event is part of the Microeconomics Research Seminar Series.