Advanced Search
MyIDEAS: Login to save this paper or follow this series

(UN)Bundling infrastructure procurement : evidence from water supply and sewage projects

Contents:

Author Info

  • Estache, Antonio
  • Iimi, Atsushi

Abstract

Competition in public procurement auctions in the water supply and sanitation sector is largely limited. This is partly because of high technical complexity and partly because of auction design flaws. The division of lot contracts is an important policy choice for auctioneers to achieve efficiency. In general, there is a tradeoff between competition in auctions and size of contracts. Larger works could benefit from economies of scale and scope, but large contracts might undermine competition. Using data on public procurement auctions for water and sewage projects in developing countries, this paper shows that bidder entry is crucially endogenous, especially because it is determined by the auctioneer's bundling and unbundling strategy. If water treatment plant and distribution network works are bundled in a single lot package, competition would be significantly reduced, and this adverse entry effect would in turn raise the public procurement costs of infrastructure. There is no evidence of positive scope economies in the bidder cost structure. It is important to account for the underlying cost structure for designing efficient auction mechanisms.

Download Info

If 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.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2009/03/04/000158349_20090304111412/Rendered/PDF/WPS4854.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4854.

as in new window
Length:
Date of creation: 01 Mar 2009
Date of revision:
Handle: RePEc:wbk:wbrwps:4854

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Investment and Investment Climate; Government Procurement; E-Business; Debt Markets; Markets and Market Access;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Klemperer, Paul, 2002. "How (Not) to Run Auctions: The European 3G Telecom Auctions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3215, C.E.P.R. Discussion Papers.
  2. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 518-38, June.
  3. Philip A. Haile, 2001. "Auctions with Resale Markets: An Application to U.S. Forest Service Timber Sales," American Economic Review, American Economic Association, American Economic Association, vol. 91(3), pages 399-427, June.
  4. Weninger, Quinn, 2003. "Estimating Multiproduct Costs when Some Outputs Are Not Produced," Staff General Research Papers, Iowa State University, Department of Economics 10830, Iowa State University, Department of Economics.
  5. Estache, Antonio & Iimi, Atsushi, 2008. "Procurement efficiency for infrastructure development and financial needs reassessed," Policy Research Working Paper Series, The World Bank 4662, The World Bank.
  6. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115, pages 200-249.
  7. Steven Tadelis, 2009. "Auctions Versus Negotiations in Procurement: An Empirical Analysis," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 25(2), pages 372-399, October.
  8. Fay, Marianne & Yepes, Tito, 2003. "Investing in infrastructure : what is needed from 2000 to 2010?," Policy Research Working Paper Series, The World Bank 3102, The World Bank.
  9. Dakshina G. De Silva & Timothy Dunne & Georgia Kosmopoulou, 2003. "An Empirical Analysis of Entrant and Incumbent Bidding in Road Construction Auctions," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 51(3), pages 295-316, 09.
  10. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2009. "Governance matters VIII : aggregate and individual governance indicators 1996-2008," Policy Research Working Paper Series, The World Bank 4978, The World Bank.
  11. Omar Arias & Kevin F. Hallock & Walter Sosa Escudero, 1999. "Individual Heterogeneity in the Returns to Schooling: Instrumental Variables Quantile Regression using Twins Data," Department of Economics, Working Papers 016, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
  12. Hiroshi Ohashi, 2009. "Effects of Transparency in Procurement Practices on Government Expenditure: A Case Study of Municipal Public Works," Review of Industrial Organization, Springer, Springer, vol. 34(3), pages 267-285, May.
  13. Estache, Antonio & Iimi, Atsushi, 2009. "Bidders'entry and auctioneer's rejection : applying a double selection model to road procurement auctions," Policy Research Working Paper Series, The World Bank 4855, The World Bank.
  14. Michael K. Price, 2008. "Using The Spatial Distribution Of Bidders To Detect Collusion In The Marketplace: Evidence From Timber Auctions," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 48(2), pages 399-417.
  15. Palfrey, Thomas R, 1983. "Bundling Decisions by a Multiproduct Monopolist with Incomplete Information," Econometrica, Econometric Society, Econometric Society, vol. 51(2), pages 463-83, March.
  16. Dakshina De Silva & Timothy Dunne & Anuruddha Kankanamge & Georgia Kosmopoulou, 2005. "The Impact of Public Information on Bidding in Highway Procurement Auctions," Microeconomics, EconWPA 0511011, EconWPA.
  17. Tong Li & Isabelle Perrigne, 2003. "Timber Sale Auctions with Random Reserve Prices," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 189-200, February.
  18. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
  19. Paarsch, Harry J., 1997. "Deriving an estimate of the optimal reserve price: An application to British Columbian timber sales," Journal of Econometrics, Elsevier, Elsevier, vol. 78(2), pages 333-357, June.
  20. Marion, Justin, 2007. "Are bid preferences benign? The effect of small business subsidies in highway procurement auctions," Journal of Public Economics, Elsevier, Elsevier, vol. 91(7-8), pages 1591-1624, August.
  21. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, Elsevier, vol. 23(4), pages 343-347.
  22. Peter S. Heller, 2005. "Understanding Fiscal Space," IMF Policy Discussion Papers, International Monetary Fund 05/4, International Monetary Fund.
  23. Atsushi Iimi, 2006. "Auction Reforms for Effective Official Development Assistance," Review of Industrial Organization, Springer, Springer, vol. 28(2), pages 109-128, 03.
  24. Srabana Gupta, 2002. "Competition and collusion in a government procurement auction market," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 30(1), pages 13-25, March.
  25. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2007. "Governance Matters VI: Aggregate and Individual Governance Indicators, 1996-2006," Policy Research Working Paper Series, The World Bank 4280, The World Bank.
  26. Paulo K. Monteiro & Flavio M. Menezes, 2000. "original papers : Auctions with endogenous participation," Review of Economic Design, Springer, Springer, vol. 5(1), pages 71-89.
  27. Kwoka, John E., 2002. "Vertical economies in electric power: evidence on integration and its alternatives," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 20(5), pages 653-671, May.
  28. Wolfstetter, Elmar, 1996. " Auctions: An Introduction," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 10(4), pages 367-420, December.
  29. Paarsch, Harry J., 1992. "Deciding between the common and private value paradigms in empirical models of auctions," Journal of Econometrics, Elsevier, Elsevier, vol. 51(1-2), pages 191-215.
  30. Chakraborty, Indranil, 2006. "Bundle and separate sales in auctions with entry," Games and Economic Behavior, Elsevier, Elsevier, vol. 54(1), pages 31-46, January.
  31. J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications, The World Bank, number 15024, August.
  32. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, American Economic Association, vol. 84(3), pages 585-99, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Nassima Rabhi, 2012. "Water partial privatization: access and quality consequences for urban areas in Senegal," Post-Print, HAL dumas-00811476, HAL.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:4854. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.