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Bidders´entry and auctioneer´s rejection: Applying a double selection model to road procurement auctions

Author

Listed:
  • Antonio Estache

    (Université Libre de Bruxelles)

  • Atsushi Iimi

    (World Bank)

Abstract

Public procurement is a dynamic process involving vendors, contractors and procuring agencies. Even before submitting bids, competition among contractors may already have started. Given the nature of public work and expected strategies of rivals, some firms decide to enter the market, but others do not. Procurers can also enhance or limit the bidder participation through various ex ante qualification procedures for quality assurance purposes. Some applicants are qualified, but others are not. Thus, the selection process has two dimensions: bidders self-select, and an auctioneer may (dis)qualify some applicants. The paper explores this selection dynamics, using procurement data from road projects in developing countries. It shows that bidders are selecting themselves; low-cost firms are more prone to enter the market. But they are more likely to be rejected for technical reasons. Procurement design, such as contract size, and public governance are also found important determinants of the entry strategy of firms.

Suggested Citation

  • Antonio Estache & Atsushi Iimi, 2011. "Bidders´entry and auctioneer´s rejection: Applying a double selection model to road procurement auctions," Journal of Applied Economics, Universidad del CEMA, vol. 14, pages 199-223, November.
  • Handle: RePEc:cem:jaecon:v:14:y:2011:n:2:p:199-223
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    File URL: http://www.sciencedirect.com/science/journal/15140326/14/2
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    Cited by:

    1. Lobna AbdelLatif & Mohamed Zaky, 2013. "The Macro-Micro Nexus and Public Procurement Support Policy for SMEs: The Case of Pharmaceuticals in Egypt," Working Papers 818, Economic Research Forum, revised Dec 2013.

    More about this item

    Keywords

    auction theory; endogenous bidder entry; infrastructure development; public procurement.;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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