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Reputation, Competition, and Entry in Procurement

  • Giancarlo Spagnolo

    (SITE, Tor Vergata, EIEF and CEPR)

Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation constrains the use of past performance information to select contractors while in the US its use is encouraged. I present some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and discuss the complementary roles of discretion and restricted competition in reinforcing relational/reputational forces, both in theory and in a new empirical study on the effects restricted rather than open auctions. I conclude reporting preliminary results form a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than hindering new entry.

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File URL: http://www.eief.it/files/2012/09/wp-01-reputation-competition-and-entry-in-procurement2.pdf
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Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 1201.

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Length: 16 pages
Date of creation: 2012
Date of revision: Jan 2012
Handle: RePEc:eie:wpaper:1201
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  1. Butler, Jeffrey V. & Carbone, Enrica & Conzo, Pierluigi & Spagnolo, Giancarlo, 2013. "Reputation and Entry," Konkurrensverket Working Paper Series in Law and Economics 2013:3, Konkurrensverket (Swedish Competition Authority).
  2. Iossa, Elisabetta & Rey, Patrick, 2013. "Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration," CEPR Discussion Papers 9571, C.E.P.R. Discussion Papers.
  3. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
  4. Abhijit V. Banerjee & Esther Duflo, 2000. "Reputation Effects And The Limits Of Contracting: A Study Of The Indian Software Industry," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 989-1017, August.
  5. Calzolari, Giacomo & Spagnolo, Giancarlo, 2009. "Relational Contracts and Competitive Screening," CEPR Discussion Papers 7434, C.E.P.R. Discussion Papers.
  6. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
  7. Oriana Bandiera & Andrea Prat & Tommaso Valletti, 2008. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," CEIS Research Paper 115, Tor Vergata University, CEIS, revised 14 Jul 2008.
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