Do Combinatorial Procurement Auctions Lower Cost? - An Empirical Analysis of Public Procurement of Multiple Contracts
AbstractCombinatorial procurement auctions are desirable as they enable bidding firms to pass their potential cost synergies on to the procuring entity and may lead to a reduction in cost for the procuring entity and enhancing efficiency. However, an assessment of the benefits of the combinatorial mechanism, based on the observed package discounts, is likely to overstate the true cost savings generated by the mechanism. The option for a firm to submit bids on bundles of contracts gives rise to a strategic effect because a firm’s stand-alone bids compete with its package bids. Therefore, bidders might find it profitable to inflate their stand-alone bids in order to favour their package bids. Using data from first-price procurement auctions of single and multiple contracts, with and without the option to submit package bids, we find that firms inflate their stand alone bids in the combinatorial auctions compared to their corresponding bids in standard first-price procurement auctions. Further, the analysis does not show significant differences in the procurer’s cost by type of auction.
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Bibliographic InfoPaper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 776.
Length: 16 pages
Date of creation: 13 Aug 2009
Date of revision: 16 Sep 2009
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Combinatorial procurement auctions; Contract bidding;
Other versions of this item:
- Lunander, Anders & Lundberg, Sofia, 2011. "Do Combinatorial Procurement Auctions Lower Cost? - An Empirical Analysis of Public Procurement of Multiple Contracts," UmeÃ¥ Economic Studies 825, Umeå University, Department of Economics.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-22 (All new papers)
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