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Government Concession Contracts in Chile: The Role of Competition in the Bidding Process

Author

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  • Ricardo Paredes
  • José Miguel Sánchez

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

Over the last 12 years, Chile has been very successful in attracting private participation into the provision of Public Infrastructure. Private capital has gone into road infrastructure, ports and airports all over the country in the form of Concessions. The aim of the 1991 Concession Law, and that of the specific contracts associated with each project, has been to provide much-needed infrastructure efficiently and without committing government resources better employed elsewhere. Using the contracts of four infrastructure projects involving the private sector in Chile, we show that even though these projects and the Concessions Program are positively evaluated, design flaws in the auction setup directly or indirectly reduced competition in the bidding process, negatively affected performance, created incentives for ex-post renegotiation and precluded welfare maximization.

Suggested Citation

  • Ricardo Paredes & José Miguel Sánchez, 2003. "Government Concession Contracts in Chile: The Role of Competition in the Bidding Process," Documentos de Trabajo 258, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:258
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    File URL: https://www.economia.uc.cl/docs/doctra/dt-258.pdf
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    References listed on IDEAS

    as
    1. Bester, Helmut & Sakovics, Jozsef, 2001. "Delegated bargaining and renegotiation," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 459-473, August.
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    5. Levy,Brian & Spiller,Pablo T. (ed.), 1997. "Regulations, Institutions, and Commitment," Cambridge Books, Cambridge University Press, number 9780521550130.
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    7. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
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    Cited by:

    1. Ricardo D.Paredes & Luis I.Rizzi & Javier Valenzuela, 2006. "¿Cazabobos o salvavidas? : la economía política de los fotorradares en Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 33(2 Year 20), pages 97-116, December.
    2. Isidro Hernández, 2003. "Las privatizaciones en Colombia," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, December.
    3. Ricardo Paredes & Andrés Crisosto & Philippe Martí, 2014. "Judicial versus Private Auctions: Better without Protection?," Estudios de Economia, University of Chile, Department of Economics, vol. 41(2 Year 20), pages 171-186, December.

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    More about this item

    Keywords

    Contracts; concessions; bidding;
    All these keywords.

    JEL classification:

    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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