Quality and price in scoring auctions

Abstract

Currently, many governments utilize scoring auctions, a format in which bidders submit both price and quality proposals. The objective is to secure high-quality procurement, even if it results in a higher price. In this paper, we theoretically confirm this trade-off. We compare scoring auctions to traditional auction formats, where the auctioneer first optimally selects the quality, followed by bidders submitting price bids. Our primary result identifies the conditions under which scoring auctions lead to higher quality, albeit at an increased price.