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Design of public procurement auctions: Evidence from cleaning contracts

Author

Listed:
  • Ari Hyytinen
  • Sofia Lundberg
  • Otto Toivanen

Abstract

We compare beauty contests with first-price sealed-bid and scoring auctions, using data on public procurement of cleaning services in Swedish municipalities. The lowest submitted and winning bids are similar in all auction designs despite a higher price sensitivity of procurement bureaucrats in scoring (and first-price) auctions. There is more entry in beauty contests, by firms favored in them. Reduced entry into the scoring and price only auctions largely explains why the procurement costs are not lowered compared to beauty contests.

Suggested Citation

  • Ari Hyytinen & Sofia Lundberg & Otto Toivanen, 2015. "Design of public procurement auctions: Evidence from cleaning contracts," Working Papers of Department of Economics, Leuven 483670, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:483670
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    2. Yuanzhu Lu & Xundong Yin & Hu Zhang, 2023. "Does surround‐bidding corruption hurt procurers?," Manchester School, University of Manchester, vol. 91(4), pages 320-335, July.
    3. Dirk Czarnitzki & Paul Hünermund & Nima Moshgbar, 2018. "Public procurement as policy instrument for innovation," Working Papers of Department of Economics, Leuven 606259, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    4. Jaakko Meriläinen & Janne Tukiainen, 2019. "Public Procurement versus Laissez-Faire: Evidence from Household Waste Collection," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 446-463.
    5. Tukiainen, Janne & Blesse, Sebastian & Bohne, Albrecht & Giuffrida, Leonardo M. & Jääskeläinen, Jan & Luukinen, Ari & Sieppi, Antti, 2024. "What are the priorities of bureaucrats? Evidence from conjoint experiments with procurement officials," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
    6. Michael Klien & Michael Böheim & Matthias Firgo & Andreas Reinstaller & Peter Reschenhofer & Yvonne Wolfmayr, 2021. "Stärkung der Unabhängigkeit des Wirtschaftsstandortes Österreich bei kritischen Produkten," WIFO Studies, WIFO, number 67234, August.
    7. Matteucci, Nicola, 2021. "Procuring NGA infrastructure: The performance of EMAT auctions in Italy," Telecommunications Policy, Elsevier, vol. 45(1).
    8. Tatyana Deryugina & Alminas Žaldokas & Anastassia Fedyk & Yuriy Gorodnichenko & James Hodson & Ilona Sologoub, 2025. "Rating Government Procurement Markets," NBER Working Papers 34479, National Bureau of Economic Research, Inc.
    9. Nogues Comas,Antoni Albert & Mendes Dos Santos,Nuno Filipe, 2021. "Measuring Public Procurement Rules and Practices : Benchmarking a Recurrent Infrastructure Contract," Policy Research Working Paper Series 9651, The World Bank.
    10. Martimort, David & Arve, Malin, 2023. "Auctioning Long-Term Projects under Financial Constraints," TSE Working Papers 23-1469, Toulouse School of Economics (TSE), revised May 2024.
    11. Strömbäck, Elon, 2015. "Policy by Public Procurement: Opportunities and Pitfalls," Umeå Economic Studies 915, Umeå University, Department of Economics.
    12. Camboni Riccardo & Valbonesi Paola, 2021. "Incumbent and Entrant Bidding in Scoring Rule Auctions: A Study on Italian Canteen Services," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(1), pages 1-43, January.
    13. Leonardo M. Giuffrida & Gabriele Rovigatti, 2022. "Supplier selection and contract enforcement: Evidence from performance bonding," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(4), pages 980-1019, November.
    14. World Bank, 2023. "Governance Risk Assessment System (GRAS)," World Bank Publications - Reports 40640, The World Bank Group.
    15. Czarnitzki, Dirk & Hünermund, Paul & Moshgbar, Nima, 2020. "Public Procurement of Innovation: Evidence from a German Legislative Reform," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    16. Visa Pitkänen, 2022. "Competition and efficiency in repeated procurements: Lessons from the Finnish rehabilitation markets," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 820-835, May.
    17. Jääskeläinen, Jan & Tukiainen, Janne, 2019. "Anatomy of public procurement," Working Papers 118, VATT Institute for Economic Research.

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    Keywords

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    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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