Adverse selection in procurement arises when low-cost bidders are also low-quality suppliers. We propose a mechanism called LoLA which, under some conditions, is the best incentive-compatible mechanism for maximizing any combination of buyer’s and social surplus in the presence of adverse...

Adverse selection in procurement arises when low-cost bidders are also lowquality suppliers. We propose a mechanism called LoLA which, under some conditions, is the best incentive-compatible mechanism for maximizing either the seller's or the social surplus in the presence of adverse selection....

Standard Bayesian models assume agents know and fully exploit prior distributions over types. We are interested in modeling agents who lack detailed knowledge of prior distributions. In auctions, that agents know priors has two consequences: (i) signals about own valuation come with precise...