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Bidders' Entry and Auctioneers' Rejection: Applying a Double Selection Model to Road Procurement Auctions

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  • Antonio Estache
  • A. Iimi

Abstract

Limited competition has been a serious concern in infrastructure procurement. Importantly, however, there are normally a number of potential bidders initially showing interest in proposed projects. This paper focuses on tackling the question why these initially interested bidders fade out. An empirical problem is that no bids of fading-out firms are observable. They could decide not to enter the process at the beginning of the tendering or may be technically disqualified at any point of the selection process. The paper applies the double selection model to procurement data from road development projects in developing countries and examines why competition ends up restricted. It shows that bidders are self-selective and auctioneers also tend to limit participation depending on the size of contracts. Then, limited competition would likely lead to high infrastructure procurement costs.

Suggested Citation

  • Antonio Estache & A. Iimi, 2009. "Bidders' Entry and Auctioneers' Rejection: Applying a Double Selection Model to Road Procurement Auctions," Working Papers ECARES 2009_008, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2009_008
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    Cited by:

    1. Estache, Antonio & Iimi, Atsushi, 2011. "(Un)bundling infrastructure procurement: Evidence from water supply and sewage projects," Utilities Policy, Elsevier, vol. 19(2), pages 104-114, June.
    2. Lobna AbdelLatif & Mohamed Zaky, 2013. "The Macro-Micro Nexus and Public Procurement Support Policy for SMEs: The Case of Pharmaceuticals in Egypt," Working Papers 818, Economic Research Forum, revised Dec 2013.

    More about this item

    Keywords

    Public procurement; auction theory; endogenous bidder entry; infrastructure development;

    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
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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