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Will Procurement Officials be Biased to Disregard Procurement Rules in Favor of a Low-priced, Albeit Defective, Bid?

Author

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  • Dekel Omer

    () (Department of Law, College of Law and Business, Ramat-Gan, Israel)

  • Dotan Yoav

    () (Faculty of Law, Hebrew University, Jerusalem, Israel)

Abstract

To what extent are professional decision-makers in the field of public procurement susceptible to cognitive biases? Recent research found a bias in favor of the lower bidder when ranking competing bids (Dekel and Schurr 2014, “Cognitive Biases in Government Procurement – an Experimental Study with Real Bid Evaluators,” 10(2) Review of Law and Economics 169–200). In the present research we examine this question regarding another stage of the public procurement process – the qualification stage. To this end, we conducted a series of experiments with the participation of procurement officials in situations that closely resemble their daily work. Our main finding is that even though procurement officials are susceptible to a cognitive bias when they have to score competing bids, they overcome that bias when asked to decide whether to qualify faulty or questionable bids. We cautiously ascribe this difference to the different types of decision-making involved, and suggest further explorations of these insights.

Suggested Citation

  • Dekel Omer & Dotan Yoav, 2018. "Will Procurement Officials be Biased to Disregard Procurement Rules in Favor of a Low-priced, Albeit Defective, Bid?," Review of Law & Economics, De Gruyter, vol. 14(2), pages 1-30, July.
  • Handle: RePEc:bpj:rlecon:v:14:y:2018:i:2:p:30:n:5
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    More about this item

    Keywords

    public procurement; cognitive bias; behavioral economics; lower bid bias; competitive bidding;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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