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Auctions with Endogenous Participation and Quality Thresholds: Evidence from ODA Infrastructure Procurement

Author

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  • Antonio Estache
  • A. Iimi

Abstract

Infrastructure projects are often technically complicated and highly customized. Therefore, procurement competition tends to be limited. Competition is the single most important factor toward auction efficiency and anti-corruption. However, the degree of competition realized is closely related to bidders’ entry decision and auctioneer’s decision on how to assess technical attributes in the bid evaluation process. The paper estimates the interactive effects among quality, entry and competition. With data on procurement auctions for electricity projects in developing countries, it is found that large electricity works are by nature costly and can attract only a few participants. The limited competition would raise government procurement costs. In addition, high technical requirements are likely to be imposed for these large-scale projects, which will in turn add extra costs for the better quality of works and limit bidder participation furthermore. The evidence suggests that the quality is of particular importance in large infrastructure projects and auctioneers cannot easily substitute prices for quality.

Suggested Citation

  • Antonio Estache & A. Iimi, 2009. "Auctions with Endogenous Participation and Quality Thresholds: Evidence from ODA Infrastructure Procurement," Working Papers ECARES 2009_006, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2009_006
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    Cited by:

    1. Arno Van Der Vlist & Sander Hardeman, 2011. "On the Design of Public Infrastructure procurements," ERSA conference papers ersa10p1060, European Regional Science Association.
    2. Bappaditya Mukhopadhyay, 2011. "Evaluating Public Procurement," Review of Market Integration, India Development Foundation, vol. 3(1), pages 21-68, April.
    3. Takano, Guillermo, 2017. "Public-Private Partnerships as rent-seeking opportunities: A case study on an unsolicited proposal in Lima, Peru," Utilities Policy, Elsevier, vol. 48(C), pages 184-194.
    4. Antonio Estache & Atsushi Iimi, 2012. "Quality or Price? Evidence from ODA-Financed Public Procurement," Public Finance Review, , vol. 40(4), pages 435-469, July.

    More about this item

    Keywords

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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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