Bid avarage methods in Procurement
AbstractProcurement awarding mechanisms based on average price have been advocated to soften price competition and reduce cost overruns. We show that their theoretical support is shaky. When the bid closest to the average is awarded, firms submit identical bids, making the selection extremely costly and random, without reducing opportunistic behaviors ex-post. When instead the bid closest and below the average is awarded, the equilibrium is very sensitive to firms’ production and participation costs. Either it displays tougher competition than in a first price auction, or it induces firms to randomize their bids.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 8997.
Date of creation: 2006
Date of revision:
Other versions of this item:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
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.:
- Paul Klemperer, 2004.
"Auctions: Theory and Practice,"
Online economics textbooks,
SUNY-Oswego, Department of Economics, number auction1, January.
- R. Preston McAfee & John McMillan, 1986. "Bidding for Contracts: A Principal-Agent Analysis," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 326-338, Autumn.
- Decio Coviello & Mario Mariniello, 2008.
"Does Publicity Affect Competition? Evidence from Discontinuities in Public Procurement Auctions?,"
Economics Working Papers
ECO2008/04, European University Institute.
- Decio Coviello & Mario Mariniello, 2008. "Does Publicity Affect Competition? Evidence from Discontinuities in Public Procurement Auctions," CSEF Working Papers 189, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Gian Luigi Albano & Federico Dini & Roberto Zampino, 2008. "Bidding for Complex Projects: Evidence From the Acquisitions of IT Services," Working Papers 2008.86, Fondazione Eni Enrico Mattei.
- Maris Goldmanis & Antonio Penta & Francesco Decarolis, 2012.
"Common Agency and Coordinated Bids in Sponsored Search Auctions,"
2012 Meeting Papers
106, Society for Economic Dynamics.
- Francesco Decarolis & Maris Goldmanis & Antonio Penta, 2013. "Common Agency and Coordinated Bids in Sponsored Search Auctions," Working Papers 13-19, NET Institute.
- Alessandro Bucciol & Ottorino Chillemi & Giacomo Palazzi, 2011.
"Cost Overrun and Auction Format in Public Works,"
"Marco Fanno" Working Papers
0129, Dipartimento di Scienze Economiche "Marco Fanno".
- Ottorino Chillemi & Claudio Mezzetti, 2014. "Optimal procurement mechanisms: bidding on price and damages for breach," Economic Theory, Springer, vol. 55(2), pages 335-355, February.
- Bucciol, Alessandro & Chillemi, Ottorino & Palazzi, Giacomo, 2013. "Cost overrun and auction format in small size public works," European Journal of Political Economy, Elsevier, vol. 30(C), pages 35-42.
- Bergman, Mats & Lundberg, Sofia, 2011. "Tender Evaluation and Award Methodologies in Public Procurement," UmeÃ¥ Economic Studies 821, Umeå University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.