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Optimal bidder participation in public procurement auctions

Author

Listed:
  • Ilke Onur

    (University of South Australia)

  • Bedri Kamil Onur Tas

    (TOBB ETU)

Abstract

This paper empirically identifies the optimal number of bidders to achieve the lowest procurement prices in public procurement auctions. We examine a unique data set that covers all Turkish government procurement auctions comprising more than half a million observations for the period 2005–2012. We present a novel and easy-to-implement method to investigate the number of bidders required for the public procurement markets to be competitive. Our results suggest that procurement costs decrease until six to eight bidders. Policy makers can employ the method to investigate the optimal number of bidders and design policies to promote competition. Moreover, policy makers can also make use of the optimal numbers as focal points to inspect whether competitive efficiency is achieved in public procurement auctions.

Suggested Citation

  • Ilke Onur & Bedri Kamil Onur Tas, 2019. "Optimal bidder participation in public procurement auctions," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(3), pages 595-617, June.
  • Handle: RePEc:kap:itaxpf:v:26:y:2019:i:3:d:10.1007_s10797-018-9515-2
    DOI: 10.1007/s10797-018-9515-2
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    More about this item

    Keywords

    Public procurement auctions; Endogeneity; Competition;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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