Bidders´entry and auctioneer´s rejection: Applying a double selection model to road procurement auctions
AbstractPublic procurement is a dynamic process involving vendors, contractors and procuring agencies. Even before submitting bids, competition among contractors may already have started. Given the nature of public work and expected strategies of rivals, some firms decide to enter the market, but others do not. Procurers can also enhance or limit the bidder participation through various ex ante qualification procedures for quality assurance purposes. Some applicants are qualified, but others are not. Thus, the selection process has two dimensions: bidders self-select, and an auctioneer may (dis)qualify some applicants. The paper explores this selection dynamics, using procurement data from road projects in developing countries. It shows that bidders are selecting themselves; low-cost firms are more prone to enter the market. But they are more likely to be rejected for technical reasons. Procurement design, such as contract size, and public governance are also found important determinants of the entry strategy of firms.
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Bibliographic InfoArticle provided by Universidad del CEMA in its journal Journal of Applied Economics.
Volume (Year): XIV (2011)
Issue (Month): (November)
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auction theory; endogenous bidder entry; infrastructure development; public procurement.;
Find related papers by JEL classification:
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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