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Abstract

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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Bibliographic Info

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
Date of revision:
Handle: RePEc:cre:uqamwp:20-05

Contact details of provider:
Postal: P.O. Box 8888, Downtown Station, Montreal (Canada) Quebec, H3C 3P8
Phone: (514) 987-4114
Fax: (514) 987-8494
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Web page: http://www.uqam.ca/economie/
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Related research

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

Other versions of this item:

Find related papers by JEL classification:

• D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
• H40 - Public Economics - - Publicly Provided Goods - - - General

This paper has been announced in the following NEP Reports:

• NEP-ALL-2001-02-14 (All new papers)

References

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1. Emmanuel Guerre & Isabelle Perrigne & Quang Vuong, 2000. "Optimal Nonparametric Estimation of First-Price Auctions," Econometrica, Econometric Society, vol. 68(3), pages 525-574, May.
2. Florens, Jean-Pierre & Hugo, Marie-Anne & Richard, Jean-Francois, 1997. "Game theory econometric models: application to procurements in the space industry," European Economic Review, Elsevier, vol. 41(3-5), pages 951-959, April.
   
   • 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.
3. Laffont, Jean-Jacques & Vuong, Quang, 1993. "Structural econometric analysis of descending auctions," European Economic Review, Elsevier, vol. 37(2-3), pages 329-341, April.
   
   • Laffont, J.J. & Vuong, Q., 1992. "Structural Econometrics Analysis of descending Auctions," Papers 9202, Southern California - Department of Economics.
   • Laffont, J.J. & Vuong, Q., 1992. "Structural Econometrics Analysis of Descending Auctions," Papers 92.272, Toulouse - GREMAQ.
4. 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.
   
   • Paarsch, H.J., 1990. "Deciding Between The C Ommon And Private Value Paradigms In Empirical Models Of Auctions," UBC Departmental Archives 90-09, UBC Department of Economics.
5. Hardle, W. & Tsybakov, A., 1991. "How sensitive are average derivates ?," CORE Discussion Papers 1991044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
   
   • Hardle, Wolfgang & Tsybakov, A. B., 1993. "How sensitive are average derivatives?," Journal of Econometrics, Elsevier, vol. 58(1-2), pages 31-48, July.
   • Hardle, W. & Tsybakov, A.B., 1992. "How Sensitive are Average Derivatives?," Papers 9208, Tilburg - Center for Economic Research.
   • Hardle, W.K. & Tsybakov, A.B., 1992. "How sensitive are average derivatives?," Discussion Paper 1992-8, Tilburg University, Center for Economic Research.
6. Laffont, Jean-Jacques & Ossard, Hervé & Vuong, Quang, 1991. "Econometrics of First-Price Auctions," IDEI Working Papers 7, Institut d'Économie Industrielle (IDEI), Toulouse.
   
   • Laffont, Jean-Jacques & Ossard, Herve & Vuong, Quang, 1995. "Econometrics of First-Price Auctions," Econometrica, Econometric Society, vol. 63(4), pages 953-80, July.
7. 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.
8. 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.
9. Paarsch, H.J. & Donald, S.G., 1991. "Piecewise Pseudo-Maximum Likelihood Estimation in Empirical Models of Autions," UBC Departmental Archives 91-27, UBC Department of Economics.
   
   • 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.
10. Mireia Jofre-Bonet & Martin Pesendorfer, 2003. "Estimation of a Dynamic Auction Game," Econometrica, Econometric Society, vol. 71(5), pages 1443-1489, 09.
    
    • Mireia Jofre-Bonet & Martin Pesendorfer, 2001. "Estimation of a Dynamic Auction Game," NBER Working Papers 8626, National Bureau of Economic Research, Inc.
11. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
12. Elyakime, Bernard & Laffont, Jean-Jacques & Loisel, Patrice & Vuong, Quang, 1993. "First-Price Sealed-Bid Auctions with Secret Reservation Prices," IDEI Working Papers 27, Institut d'Économie Industrielle (IDEI), Toulouse.
    
    • 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.
13. Holt, Charles A, Jr, 1979. "Uncertainty and the Bidding for Incentive Contracts," American Economic Review, American Economic Association, vol. 69(4), pages 697-705, September.
14. 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.
15. 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.
16. Guerre, E. & Perrigne, I. & Vuong, Q., 1995. "Nonparametric Estimation of First-Price Auctions," Papers 9504, Southern California - Department of Economics.

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