Cost Overrun and Auction Format in Public Works
AbstractWe provide an empirical investigation of cost overruns in small public procurement projects, using a panel dataset of auctions held in the Italian Veneto region between 2004 and 2006. We use this sample to study the effect on cost overruns of auction formats (average bid as opposed to first price rule) conditional on the entry mechanisms (free as opposed to limited access). It is commonly believed that cost overruns are lower under average bid auctions relative to first price auctions. We find support to this belief only when access to the auction is limited. We interpret this finding as evidence that winner's adverse selection is an important problem in auctions for small size public works, and the lack of a significant effect of the average bid format in free entry auctions may reflect collusion.
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Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0129.
Length: 15 pages
Date of creation: Mar 2011
Date of revision:
cost overrun; average bid; first price; free entry; work delays.;
Other versions of this item:
- 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-2011-04-02 (All new papers)
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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