Limited competition has been a serious concern in infrastructure procurement. Importantly, however, there are normally a number of potential bidders initially showing interest in proposed projects. This paper focuses on tackling the question why these initially interested bidders fade out. An empirical problem is that no bids of fading-out firms are observable. They could decide not to enter the process at the beginning of the tendering or may be technically disqualified at any point of the selection process. The paper applies the double selection model to procurement data from road development projects in developing countries and examines why competition ends up restricted. It shows that bidders are self-selective and auctioneers also tend to limit participation depending on the size of contracts. Then, limited competition would likely lead to high infrastructure procurement costs.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Université Libre de Bruxelles, Ecares in its series ECARES Working Papers with number
2009_008.
Find related papers by JEL classification: 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 D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
This paper has been announced in the following NEP Reports: