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Bidders' Entry and Auctioneers' Rejection: Applying a Double Selection Model to Road Procurement Auctions

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  • Antonio Estache
  • A. Iimi

Abstract

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.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number 2009_008.

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Length: 25 p.
Date of creation: 2009
Date of revision:
Publication status: Published by:
Handle: RePEc:eca:wpaper:2009_008

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Related research

Keywords: Public procurement; auction theory; endogenous bidder entry; infrastructure development;

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Cited by:
  1. Estache, Antonio & Iimi, Atsushi, 2011. "(Un)bundling infrastructure procurement: Evidence from water supply and sewage projects," Utilities Policy, Elsevier, vol. 19(2), pages 104-114, June.

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