Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders?
AbstractAsymmetric auctions are among the most rapidly growing areas in the auction literature. The potential benefits from improved auction efficiency are expected to be enormous in public procurement auctions related to official development projects. Entrant bidders are considered a key to enhance competition in an auction and break potential collusive arrangements among incumbent bidders. Asymmetric auction theory predicts that weak (fringe) bidders would bid more aggressively when they are faced with a strong (incumbent) opponent. With ODA procurement data, it has been found that in the major infrastructure sectors, entrants submitted systematically aggressive bids in the presence of an incumbent bidder. It is also shown that high concentration of incumbents in an auction would harm auction efficiency, raising procurement costs. The results suggest that auctioneers should encourage fringe bidders to actively participate in the bidding process while maintaining the quality of the projects. It is conducive to enhancing competitive circumstances in public procurements and improving allocative efficiency.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number 2008_020.
Length: 23 p.
Date of creation: Mar 2008
Date of revision:
Publication status: Published by: ECARES, Université Libre de Bruxelles, Bruxelles
Public procurement; auction theory; infrastructure development; bidder asymmetry; fringe bidders; market entry;
Other versions of this item:
- Antonio Estache & Atsushi Iimi, 2010. "Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders?," Review of Industrial Organization, Springer, vol. 36(2), pages 163-187, March.
- Estache, Antonio & Iimi, Atsushi, 2008. "Bidder asymmetry in infrastructure procurement : are there any fringe bidders ?," Policy Research Working Paper Series 4660, The World Bank.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-21 (All new papers)
- NEP-COM-2008-10-21 (Industrial Competition)
- NEP-PPM-2008-10-21 (Project, Program & Portfolio Management)
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