Title: Delegated Bidding
Abstract: We study an interaction in which principals must hire agents
to bid in an auction. The agents can exert unobserved and costly effort
to collect information about the value of the object. The optimal remuneration
scheme must induce the agents to exert effort and then appropriately
condition their bids on their information. The principals thus face
a competing-mechanisms problem with interdependence valuations among
the agents. We identify conditions under which the principals’ mechanismchoice
game has a pure equilibrium. We characterize the distortions induced
in the agents’ bidding schemes by the principals’ efforts to reduce the agents’
rents, and characterize circumstances under which these distortions induce
overbidding.