Auctions with Endogenous Participation and Quality Thresholds: Evidence from ODA Infrastructure Procurement
AbstractInfrastructure projects are often technically complicated and highly customized. Therefore, procurement competition tends to be limited. Competition is the single most important factor toward auction efficiency and anti-corruption. However, the degree of competition realized is closely related to bidders’ entry decision and auctioneer’s decision on how to assess technical attributes in the bid evaluation process. The paper estimates the interactive effects among quality, entry and competition. With data on procurement auctions for electricity projects in developing countries, it is found that large electricity works are by nature costly and can attract only a few participants. The limited competition would raise government procurement costs. In addition, high technical requirements are likely to be imposed for these large-scale projects, which will in turn add extra costs for the better quality of works and limit bidder participation furthermore. The evidence suggests that the quality is of particular importance in large infrastructure projects and auctioneers cannot easily substitute prices for quality.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number 2009_006.
Length: 30 p.
Date of creation: 2009
Date of revision:
Publication status: Published by:
Public procurement; auction theory; infrastructure development; governance;
Other versions of this item:
- Estache, Antonio & Iimi, Atsushi, 2009. "Auctions with endogenous participation and quality thresholds : evidence from ODA infrastructure procurement," Policy Research Working Paper Series 4853, The World Bank.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
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