INFORMATION ENTREPRENEURS AND COMPETITION IN PROCUREMENT AUCTIONS * Phillip Leslie Pablo Zoido NBER, and Center for Global Business and the Economy Graduate School of Business Graduate School of Business Stanford University Stanford University pleslie@stanford.edu pzoido@stanford.edu Abstract We study the role of an information entrepreneur that collects and sells announcement details of forthcoming procurement auctions. On the face of it, announcement information should stimulate competition, reducing bidders’ profits and lowering winning bids. However, a theoretical analysis reveals that such information may stimulate exit of some potential bidders, leading to possibly higher winning bids. We then empirically assess the affects of such an information entrepreneur, finding that bidders who purchase the announcements then submit many more bids, in auctions with fewer competitors, allowing them to win more often while also bidding less aggressively. Procurers also benefit in this case. We find that the cost of drugs procured by public hospitals in Buenos Aires decreased by 2.9%, thanks to the auction announcements sold to potential bidders by an information entrepreneur. October, 2005 * We thank Transparent Markets for providing us with the data. Ron Siegal provided excellent research assis- tance and we received helpful comments from Ernesto Dal B´o, Dan Kessler, John McMillan, Andy Skrzypacz, and Alan Sorensen. Pablo Zoido received financial support from the Miller Research Fund for this study.