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SMEs and public procurement policy

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  • Pierre-Henri Morand

Abstract

In this paper, we characterize an optimal procurement policy as a mechanism design problem when an allotment of the contract is available, i.e., when a government faces both SMEs and large firms for carrying out a heterogeneously divisible project. Our model allows us to analyze all procurement policies (set-asides, favoritism, non-discriminatory rules), taking into account both efficiency and distributive arguments and derive a normative framework. We show that set-asides are not generally optimal, whatever the industrial preferences of the government are, while the optimal preferential treatments of firms implies complex non-linear rules. We prove that the optimal policy can be implemented using a modified Vickrey-type auction. We also consider that the firms can reduce their cost by a non observable effort, and exhibit the specific impact of cost reduction incentives on the optimal policies. Copyright Springer-Verlag Berlin/Heidelberg 2003

Suggested Citation

  • Pierre-Henri Morand, 2003. "SMEs and public procurement policy," Review of Economic Design, Springer;Society for Economic Design, vol. 8(3), pages 301-318, October.
    • Handle: RePEc:spr:reecde:v:8:y:2003:i:3:p:301-318
    DOI: 10.1007/s10058-003-0104-0
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    Cited by:

    1. Patrick GIANFALDONI & Pierre-Henri MORAND, 2015. "Incentives, Procurement and Regulation of Work Integration Social Enterprises in France: Old Ideas for New Firms?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(2), pages 199-219, June.
    2. Edquist , Charles & Zabala-Iturriagagoitia , Jon Mikel, 2012. "Why Pre-Commercial Procurement is notInnovation Procurement," Papers in Innovation Studies 2012/11, Lund University, CIRCLE - Centre for Innovation Research.
    3. Pierre-Henri Morand & François Maréchal, 2021. "Are social and environmental clauses a tool for favoritism? Analysis of French public procurement contracts ," Post-Print hal-03418572, HAL.
    4. Maréchal, François & Morand, Pierre-Henri, 2022. "Are social and environmental clauses a tool for favoritism? Analysis of French public procurement contracts," European Journal of Political Economy, Elsevier, vol. 73(C).
    5. Pierre-Henri Morand & François Maréchal, 2021. "Achats responsables et achat local : théorie et enseignements des données ouvertes françaises," Post-Print hal-03392039, HAL.
    6. Shadrina, Elena V. & Vinogradov, Dmitri V. & Kashin, Dmitry V., 2022. "Implicit incentives in green public procurement: Good intentions versus rigid regulations," Ecological Economics, Elsevier, vol. 198(C).
    7. Pierre-Henri Morand & François Marechal, 2023. "Achats publics responsables et achat local : enseignements des données ouvertes françaises," Post-Print hal-03842464, HAL.
    8. Johan Stake, 2017. "Evaluating quality or lowest price: consequences for small and medium-sized enterprises in public procurement," The Journal of Technology Transfer, Springer, vol. 42(5), pages 1143-1169, October.
    9. François MARÉCHAL & Pierre-Henri MORAND, 2004. "What Allotment and Subcontracting in Procurement Bidding," Cahiers de Recherches Economiques du Département d'économie 04.06, Université de Lausanne, Faculté des HEC, Département d’économie.
    10. Jelena Budak & Edo Rajh, 2014. "The Public Procurement System: A Business Sector Perspective," Working Papers 1401, The Institute of Economics, Zagreb.

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