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Procurement Favouritism and Technology Adoption

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  • 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.

Suggested Citation

  • Branco, Fernando, 1999. "Procurement Favouritism and Technology Adoption," CEPR Discussion Papers 2270, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2270
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    More about this item

    Keywords

    Auctions; Procurement; Protection; Technology Adoption;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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