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Protection in Government Procurement Auctions

Author

Listed:
  • Matthew T. Cole

    (Department of Economics, California Polytechnic State University)

  • Ronald Davies

    (School of Economics, University College Dublin)

  • Todd Kaplan

    (Department of Economics, University of Exeter)

Abstract

Discrimination against foreign bidders in procurement auctions has typically been achieved by price preferences, that is, a policy of accepting a range of higher prices from a domestic firm over a lower price from a foreign firm. We demonstrate that in the bidding game, each level of protection via a price preference can be achieved by an equivalent tariff. When government welfare depends only on net expenditures, this equivalence carries over to the government's decision. As such, agreements to eliminate price preferences may be unsuccessful unless accompanied by tariff limitations. On the other hand, if tariff collection is costly, then even without tariff limits banning price preferences lowers protection and increases global welfare.

Suggested Citation

  • Matthew T. Cole & Ronald Davies & Todd Kaplan, 2016. "Protection in Government Procurement Auctions," Working Papers 1601, California Polytechnic State University, Department of Economics.
  • Handle: RePEc:cpl:wpaper:1601
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    References listed on IDEAS

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    Cited by:

    1. Alen Mulabdic & Lorenzo Rotunno, 2021. "Trade barriers in government procurement," AMSE Working Papers 2122, Aix-Marseille School of Economics, France.
    2. Aleksey V. Bogoviz & Yulia V. Ragulina & Vadim I. Erusalimsky & Yulia G. Tyurina & Elena V. Popova, 2017. "Evaluation of Economic Effectiveness of the State Purchases System: Criteria and Priorities," European Research Studies Journal, European Research Studies Journal, vol. 0(3B), pages 548-555.

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    More about this item

    Keywords

    Government Procurement; Tariffs; Price Preference;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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