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Public Procurement as Auction – Theoretical Models and Practical Problems

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  • Antal-Pomázi, Krisztina

Abstract

This paper aims to show how the theory of optimal auctions can be applied to modelling public procurement. The first part of the paper focuses on the problem of choosing the optimal procurement method. our hypothesis is that it could improve social welfare if buyers had a wider set of procedures to choose from. The second part of the paper discusses the hungarian practice of bidders and purchasers manipulating the outcome of the process by withdrawing from contracts after they have been awarded. We show that there is no economic reason for making this possible without a charge, and that penalising this behaviour would also reduce the risk of corruption.

Suggested Citation

  • Antal-Pomázi, Krisztina, 2012. "Public Procurement as Auction – Theoretical Models and Practical Problems," Public Finance Quarterly, Corvinus University of Budapest, vol. 57(4), pages 381-393.
    • Handle: RePEc:pfq:journl:v:57:y:2012:i:4:p:381-393
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    File URL: https://unipub.lib.uni-corvinus.hu/8967/
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    References listed on IDEAS

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    1. Aleksandar Pekev{c} & Michael H. Rothkopf, 2003. "Combinatorial Auction Design," Management Science, INFORMS, vol. 49(11), pages 1485-1503, November.
    2. Egil Kjerstad, 2005. "Auctions vs negotiations: a study of price differentials," Health Economics, John Wiley & Sons, Ltd., vol. 14(12), pages 1239-1251, December.
    3. Eső, Péter, 1997. "Árverés és verseny a közbeszerzésben [Auction and competition in public procurement]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 597-611.
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    5. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 13(3), pages 227-286, July.
    6. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.
    7. Yeon-Koo Che, 1993. "Design Competition through Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 668-680, Winter.
    8. Szatmári, Alexandra, 1996. "Aukciók, avagy a képbe kerül, ha a Louvre a képbe kerül?," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 303-314.
    9. Andrea Bonaccorsi & Thomas Lyon & Fabio Pammolli & Giuseppe Turchetti, 1999. "Auctions vs. Bargaining: An Empirical Analysis of Medical Device Procurement," LEM Papers Series 1999/20, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    10. Manelli, Alejandro M & Vincent, Daniel R, 1995. "Optimal Procurement Mechanisms," Econometrica, Econometric Society, vol. 63(3), pages 591-620, May.
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    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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