This paper studies multi-period public procurement when the acquisition of a single good over several periods is fixed once for all. The optimal mechanism is derived over two periods with temporal cost correlation. The most efficient firm delivers the good and gets informational rent at each...

This model captures one of the key elements of the value diversion controversy. Within a standard mixed model, we show that shareholders are better off if they allow a certain amount of diversion even if it generates a dead-weight loss.