Reputation and Entry
AbstractThere is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new firms in public procurement markets. In this paper we report results from a laboratory experiment exploring the relationship between reputation and entry in procurement. We implement a repeated procurement model with reputation for quality and the possibility of entry in which the entrant may start off with positive reputation. Our results suggest that while some past-performance based reputational mechanisms can reduce the frequency of entry, appropriately designed mechanisms significantly stimulate it. We find that our reputational mechanism increases quality but not prices, so that the introduction of this kind of mechanism may generate large welfare gains for the buyer.
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Bibliographic InfoPaper provided by Konkurrensverket (Swedish Competition Authority) in its series Konkurrensverket Working Paper Series in Law and Economics with number 2013:3.
Length: 53 pages
Date of creation: 15 May 2013
Date of revision:
Cross-border procurement; Entry; Feedback mechanisms; Incomplete contracts; Limited enforcement; Incumbency; Multidimensional competition; Outsourcing; Past performance; Procurement; Quality assurance; Small business subsidies; Reputation; Vendor rating;
Other versions of this item:
- Jeffrey V. Butler & Enrica Carbone & Pierluigi Conzo & Giancarlo Spagnolo, 2012. "Reputation and Entry," EIEF Working Papers Series 1215, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2012.
- Jeffrey V. Butler & Enrica Carbone & Pierluigi Conzo & Giancarlo Spagnolo, 2012. "Reputation and Entry," Labsi Experimental Economics Laboratory University of Siena 045, University of Siena.
- Butler, Jeffrey & Carbone, Enrica & Conzo, Pierluigi & Spagnolo, Giancarlo, 2012. "Reputation and Entry," SITE Working Paper Series 21, Stockholm Institute of Transition Economics, Stockholm School of Economics.
- Butler, Jeff & Carbone, Enrica & Conzo, Pierluigi & Spagnolo, Giancarlo, 2013. "Reputation and Entry in Procurement," CEPR Discussion Papers 9651, C.E.P.R. Discussion Papers.
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-07-20 (All new papers)
- NEP-BEC-2013-07-20 (Business Economics)
- NEP-COM-2013-07-20 (Industrial Competition)
- NEP-CTA-2013-07-20 (Contract Theory & Applications)
- NEP-IND-2013-07-20 (Industrial Organization)
- NEP-PPM-2013-07-20 (Project, Program & Portfolio Management)
- NEP-REG-2013-07-20 (Regulation)
- NEP-SBM-2013-07-20 (Small Business Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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