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Snow Removal Auctions in Montreal: Costs, Informational Rents, and Procurement Management

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Using nonparametric estimation techniques adapted from Guerre et al. [2000], we infer cost distributions and informational rents, from 666 snow removal contracts offered for tender by the City of Montreal. Our results are compatible with standard received theory of competitive auctions: there is a positive correlation between costs and bids; rents increase with the variance of costs and decrease with the number of bidders. Bids and costs have decreased over the sample period, while informational rents remained stable. The City deserves credit for these results, as it has succeeded in exploiting economies of scale while maintaining competition.

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Paper provided by Université du Québec à Montréal, Département des sciences économiques in its series Cahiers de recherche du Département des sciences économiques, UQAM with number 20-05.

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Length: 41
Date of creation: Feb 2001
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Handle: RePEc:cre:uqamwp:20-05

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Keywords: Procurement auction; nonparametric estimation; informational rents; task design; municipal contracts;

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  1. Hardle, W.K. & Tsybakov, A.B., 1992. "How sensitive are average derivatives?," Discussion Paper 1992-8, Tilburg University, Center for Economic Research.
  2. Laffont, J.J. & Vuong, Q., 1992. "Structural Econometrics Analysis of descending Auctions," Papers 9202, Southern California - Department of Economics.
  3. Paarsch, Harry J., 1992. "Deciding between the common and private value paradigms in empirical models of auctions," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 191-215.
  4. Powell, James L. & Stoker, Thomas M., 1996. "Optimal bandwidth choice for density-weighted averages," Journal of Econometrics, Elsevier, vol. 75(2), pages 291-316, December.
  5. Paarsch, H.J., 1992. "A Comparison of estimators for Empirical Models of Auction," UWO Department of Economics Working Papers 9210, University of Western Ontario, Department of Economics.
  6. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
  7. Florens, Jean-Pierre & Hugo, Marie-Anne & Richard, Jean-François, 1996. "Game Theory Econometric Models: Application to Procurements in the Space Industry," IDEI Working Papers 62, Institut d'Économie Industrielle (IDEI), Toulouse.
  8. Mireia Jofre-Bonet & Martin Pesendorfer, 2001. "Estimation of a Dynamic Auction Game," NBER Working Papers 8626, National Bureau of Economic Research, Inc.
  9. Véronique Flambard & Isabelle Perrigne, 2006. "Asymmetry in Procurement Auctions: Evidence from Snow Removal Contracts," Economic Journal, Royal Economic Society, vol. 116(514), pages 1014-1036, October.
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  12. Laffont, Jean-Jacques & Ossard, Herve & Vuong, Quang, 1995. "Econometrics of First-Price Auctions," Econometrica, Econometric Society, vol. 63(4), pages 953-80, July.
  13. Guerre, E. & Perrigne, I. & Vuong, Q., 1995. "Nonparametric Estimation of First-Price Auctions," Papers 9504, Southern California - Department of Economics.
  14. Donald, Stephen G. & Paarsch, Harry J., 1996. "Identification, Estimation, and Testing in Parametric Empirical Models of Auctions within the Independent Private Values Paradigm," Econometric Theory, Cambridge University Press, vol. 12(03), pages 517-567, August.
  15. Bernard ELYAKIME & Jean-Jacques LAFFONT & Patrice LOISEL & Quang VUONG, 1994. "First-Price Sealed-Bid Auctions with Secret Reservation Prices," Annales d'Economie et de Statistique, ENSAE, issue 34, pages 115-141.
  16. R. Preston McAfee & John McMillan, 1986. "Bidding for Contracts: A Principal-Agent Analysis," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 326-338, Autumn.
  17. Donald, Stephen G & Paarsch, Harry J, 1993. "Piecewise Pseudo-maximum Likelihood Estimation in Empirical Models of Auctions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 121-48, February.
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