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Reputation, Competition, and Entry in Procurement

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  • Giancarlo Spagnolo

    (SITE, Tor Vergata, EIEF and CEPR)

Abstract

Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation constrains the use of past performance information to select contractors while in the US its use is encouraged. I present some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and discuss the complementary roles of discretion and restricted competition in reinforcing relational/reputational forces, both in theory and in a new empirical study on the effects restricted rather than open auctions. I conclude reporting preliminary results form a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than hindering new entry.

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File URL: http://www.eief.it/files/2012/09/wp-01-reputation-competition-and-entry-in-procurement2.pdf
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Bibliographic Info

Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 1201.

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Length: 16 pages
Date of creation: 2012
Date of revision: Jan 2012
Handle: RePEc:eie:wpaper:1201

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  1. Iossa, Elisabetta & Rey, Patrick, 2012. "Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 757, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Oriana Bandiera & Andrea Prat & Tommaso Valletti, 2009. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," American Economic Review, American Economic Association, American Economic Association, vol. 99(4), pages 1278-1308, September.
  3. Abhijit Banerjee & Esther Duflo, 1999. "Reputation Effects and the Limits of Contracting: A Study of the Indian Software Industry," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 99-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 615-41, August.
  5. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(4), pages 659-79, November.
  6. Calzolari, Giacomo & Spagnolo, Giancarlo, 2009. "Relational Contracts and Competitive Screening," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7434, C.E.P.R. Discussion Papers.
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Cited by:
  1. Elisabetta Iossa & Patrick Rey, 2010. "Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration," CEIS Research Paper, Tor Vergata University, CEIS 155, Tor Vergata University, CEIS, revised 28 May 2010.
  2. Bergman, Mats & Johansson, Per & Lundberg, Sofia & Spagnolo, Giancarlo, 2014. "Privatization and Quality: Evidence from Elderly Care in Sweden," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9939, C.E.P.R. Discussion Papers.
  3. Luigi Moretti & Paola Valbonesi, 2012. "Subcontracting in Public Procurement: An Empirical Investigation," "Marco Fanno" Working Papers 0154, Dipartimento di Scienze Economiche "Marco Fanno".
  4. Spagnolo, Giancarlo & Bergman, Mats A. & Lundberg, Sofia, 2012. "Privatization and Quality: Evidence from Elderly Care in Sweden," SITE Working Paper Series 19, Stockholm Institute of Transition Economics, Stockholm School of Economics.
  5. Author-Name: Luca Di Corato & Cesare Dosi & Michele Moretto, 2014. "Bidding for Conservation Contracts," Working Papers, Fondazione Eni Enrico Mattei 2014.65, Fondazione Eni Enrico Mattei.

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