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Procurement Favouritism and Technology Adoption

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Author Info
Branco, Fernando
Abstract

The design of cost minimizing procurement rules for the selection of contractors among distinct technological groups requires the favouritism of inefficient firms. It is unclear whether these policies provide incentives for inefficient firms to adopt more efficient technologies. In this paper the inefficient firm may adopt the efficient technology at some cost. Government policy can be effective for an intermediate range of adoption costs. To induce adoption, the government should commit to favour the (initially) inefficient firm, despite both firms eventually having the same technology. Even with limited government commitment, optimal favouritism provides more incentives for technology adoption than a symmetric mechanism.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2270.

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Date of creation: Oct 1999
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Handle: RePEc:cpr:ceprdp:2270

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Related research
Keywords: Auctions; Procurement; Protection; Technology Adoption;

Find related papers by JEL classification:
D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes

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This page was last updated on 2009-12-31.

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