| The dissertation consists of two essays related to information economics and mechanism design, which address public choice problems under incomplete information, and design mechanisms to reveal the information.;The first essay studies how the government runs a procurement auction for a public project, when there is a possibility of subcontracting among suppliers. Governments often run procurement auctions to purchase goods and services. In practice, the winning contractor often subcontracts parts of the project to other bidders. This changes the strategic nature of the procurement auction: on the one hand, the bidder wants to lower his bid, so that he can increase his probability of winning the contract; on the other hand, the bidder wants to increase his bid, so that, conditional upon losing the contract, he may obtain higher profits in the subcontracting stage. I developed a two-stage subcontracting model of procurement auctions. Within the context of the model, I showed that, there is no equilibria in pure strategy. The socially efficient outcome is achieved only if there exists a separating equilibrium. I proposed a mechanism, the commitment clause, under which the government can obtain socially efficient outcomes. Moreover, I showed that procurement costs are equivalent across the first-price sealed-bid auction, the second-price sealed-bid auction and the English auction.;The second essay studies how to design a mechanism in order to provide an indivisible public good under incomplete information. Groves mechanism glows for implementing a public decision most efficiently as the dominant strategy equilibrium outcome. It incurs, however, the negative aggregate money transfer, thus it is not satisfactory with the goal of maximizing the sum of valuations and the aggregate payment. This essay proposes an equal-cost sharing mechanism: when the cost is low, the public good is built whenever one of the agents is willing to fund it at half cost; when the cost is high, the public project is provided only if both agents are willing to fund it. The equal-cost sharing mechanism is mathematically proved to maximize the objective function embodied with the aggregate money transfer among all feasible strategy-proof mechanisms, thus it is an optimal mechanism. |
