Cost overrun and auction format in small size public works
We study the effect on cost overruns of two different auction formats, the first price sealed bid and the average bid, conditional on whether entry is open or restricted. The first price format awards the contract to the lowest bid, while the average bid format awards the contract to the bid closest to the average of all the bids. This latter format is supposed to prevent an unreliable low bidder from winning the auction; as a consequence cost overruns should be lower under the average bid than under the first price format. We test this hypothesis with a panel data set of auctions held in the Italian Veneto region between 2004 and 2006, including small size public projects in sectors such as road works and building maintenance. We find that cost overruns are lower under the average bid format, but only when the entry is restricted. We then speculate on possible explanations for this result.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Francesco Decarolis & Cristina Giorgiantonio & Valentina Giovanniello, 2010.
"The awarding of public works in Italy: an analysis of the mechanisms for the selection of contractors,"
Questioni di Economia e Finanza (Occasional Papers)
83, Bank of Italy, Economic Research and International Relations Area.
- Decarolis Francesco & Giorgiantonio Cristina & Giovanniello Valentina, 2011. "The awarding of public works in Italy: an analysis of the mechanisms for the selection of contractors," Mercato Concorrenza Regole, Società editrice il Mulino, issue 2, pages 235-272.
- Evenett, Simon J & Hoekman, Bernard, 2003.
"Government Procurement: Market Access, Transparency, and Multilateral Trade Rules,"
CEPR Discussion Papers
4109, C.E.P.R. Discussion Papers.
- Evenett, Simon J. & Hoekman, Bernard M., 2005. "Government procurement: market access, transparency, and multilateral trade rules," European Journal of Political Economy, Elsevier, vol. 21(1), pages 163-183, March.
- Evenett, Simon J. & Hoekman, Bernard M., 2004. "Government procurement : Market access, transparency, and multilateral trade rules," Policy Research Working Paper Series 3195, The World Bank.
- 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.
- Aleix Calveras & Juan-Jose Ganuza & Esther Hauk, 2004. "Wild Bids. Gambling for Resurrection in Procurement Contracts," Journal of Regulatory Economics, Springer, vol. 26(1), pages 41-68, 07.
- Juan-Jos� Ganuza, 2007. "COMPETITION AND COST OVERRUNS IN PROCUREMENT -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 55(4), pages 633-660, December.
- Spagnolo, Giancarlo & Albano, Gian Luigi & Bianchi, Milo, 2006.
"Bid avarage methods in Procurement,"
8997, University Library of Munich, Germany.
- Francesco Decarolis, 2009.
"When the Highest Bidder Loses the Auction: Theory and Evidence from Public Procurement,"
2009 Meeting Papers
130, Society for Economic Dynamics.
- 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.
- Waehrer Keith, 1995. "A Model of Auction Contracts with Liquidated Damages," Journal of Economic Theory, Elsevier, vol. 67(2), pages 531-555, December.
- Zheng, Charles Z., 2001.
"High Bids and Broke Winners,"
Journal of Economic Theory,
Elsevier, vol. 100(1), pages 129-171, September.
- 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.
- Odeck, James, 2004. "Cost overruns in road construction--what are their sizes and determinants?," Transport Policy, Elsevier, vol. 11(1), pages 43-53, January.
- Spulber, Daniel F, 1990. "Auctions and Contract Enforcement," Journal of Law, Economics and Organization, Oxford University Press, vol. 6(2), pages 325-44, Fall.
- Bent Flyvbjerg & Mette K. Skamris holm & S�ren L. Buhl, 2003. "How common and how large are cost overruns in transport infrastructure projects?," Transport Reviews, Taylor & Francis Journals, vol. 23(1), pages 71-88, January.
When requesting a correction, please mention this item's handle: RePEc:eee:poleco:v:30:y:2013:i:c:p:35-42. 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: (Zhang, Lei)
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.