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Cost Overrun and Auction Format in Public Works

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Author Info

  • Alessandro Bucciol

    ()
    (Department of Economics (University of Verona))

  • Ottorino Chillemi

    ()
    (University of Padua)

  • Giacomo Palazzi

    ()
    (Generali group)

Abstract

We study the effect on cost overruns of auction formats (average bid as opposed to �first price rule) conditional on the entry mechanisms (open as opposed to restricted participation). The dataset is a panel of auctions held in the Italian Veneto region between 2004 and 2006. It includes small size public projects (with reserve price up to one million euros) in such sectors as road works and building maintenance. It is commonly believed that cost overruns are lower under average bid auctions relative to fi�rst price auctions. We fi�nd support to this belief only when participation to the auction is restricted.

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Bibliographic Info

Paper provided by University of Verona, Department of Economics in its series Working Papers with number 17/2011.

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Length: 17
Date of creation: Nov 2011
Date of revision:
Handle: RePEc:ver:wpaper:17/2011

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Related research

Keywords: cost overrun; average bid; �first price; free entry; work delays;

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References

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  1. Francesco Decarolis, 2009. "When the highest bidder loses the auction: theory and evidence from public procurement," Temi di discussione (Economic working papers) 717, Bank of Italy, Economic Research and International Relations Area.
  2. Steven Tadelis, 2009. "Auctions Versus Negotiations in Procurement: An Empirical Analysis," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(2), pages 372-399, October.
  3. Spagnolo, Giancarlo & Albano, Gian Luigi & Bianchi, Milo, 2006. "Bid avarage methods in Procurement," MPRA Paper 8997, University Library of Munich, Germany.
  4. Aleix Calveras & Juan J. Ganuza & Esther Hauk, 2001. "Wild bids. Gambling for resurrection in procurement contracts," Economics Working Papers 553, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2001.
  5. Simon Board, 2007. "Bidding into the Red: A Model of Post-Auction Bankruptcy," Journal of Finance, American Finance Association, vol. 62(6), pages 2695-2723, December.
  6. Waehrer Keith, 1995. "A Model of Auction Contracts with Liquidated Damages," Journal of Economic Theory, Elsevier, vol. 67(2), pages 531-555, December.
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Cited by:
  1. Luigi Moretti & Paola Valbonesi, 2012. "Subcontracting in Public Procurement: An Empirical Investigation," "Marco Fanno" Working Papers 0154, Dipartimento di Scienze Economiche "Marco Fanno".

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