Bidding for Complex Projects: Evidence From the Acquisitions of IT Services
Competitive bidding (as auctions) is commonly used to procure goods and services. Public buyers are often mandated by law to adopt competitive procedures to ensure transparency and promote full competition. Recent theoretical literature, however, suggests that open competition can perform poorly in allocating complex projects. In exploring the determinants of suppliers’ bidding behavior in procurement auctions for complex IT services, we find results that are consistent with theory. We find that price and quality do not exhibit the classical tradeoff one would expect: quite surprisingly, high quality is associated to low prices. Furthermore, while quality is mainly driven by suppliers’ experience, price is affected more by the scoring rule and by the level of expected competition. These results might suggest that (scoring) auctions fail to appropriately incorporate buyers’ complex price/quality preferences in the tender design.
|Date of creation:||Oct 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.feem.it/Email:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Victor P. Goldberg, 1977. "Competitive Bidding and the Production of Precontract Information," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 250-261, Spring.
- Kim, In-Gyu, 1998. "A model of selective tendering: Does bidding competition deter opportunism by contractors?," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(4), pages 907-925.
- Patrick Bajari & Robert S. McMillan & Steve Tadelis, 2003.
"Auctions Versus Negotiations in Procurement: An Empirical Analysis,"
NBER Working Papers
9757, National Bureau of Economic Research, Inc.
- Steven Tadelis, 2009. "Auctions Versus Negotiations in Procurement: An Empirical Analysis," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(2), pages 372-399, October.
- Patrick Bajari & Robert McMillan & Steven Tadelis, . "Auctions versus Negotiations in Procurement: An Empirical Analysis," Working Papers 02007, Stanford University, Department of Economics.
- Susan Athey & Philip A. Haile, 2006.
"Empirical Models of Auctions,"
Cowles Foundation Discussion Papers
1562, Cowles Foundation for Research in Economics, Yale University.
- Keith J. Crocker & Kenneth J. Reynolds, 1993. "The Efficiency of Incomplete Contracts: An Empirical Analysis of Air Force Engine Procurement," RAND Journal of Economics, The RAND Corporation, vol. 24(1), pages 126-146, Spring.
- Paarsch, Harry J., 1992. "Deciding between the common and private value paradigms in empirical models of auctions," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 191-215.
- Han Hong & Matthew Shum, 2001.
"Increasing Competition and the Winner's Curse: Evidence from Procurement,"
Economics Working Paper Archive
447, The Johns Hopkins University,Department of Economics.
- Han Hong & Matthew Shum, 2002. "Increasing Competition and the Winner's Curse: Evidence from Procurement," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 871-898.
- Hong, Han & Shum, Matthew, 2002. "Increasing Competition and the Winner's Curse: Evidence from Procurement," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 871-98, October.
- Han Hong, 2000. "Increasing Competition and the Winner's Curse: Evidence from Procurement," Econometric Society World Congress 2000 Contributed Papers 1628, Econometric Society.
- Patrick Bajari & Steven Tadelis, 1999.
"Incentives versus Transaction Costs: A Theory of Procurement Contracts,"
99029, Stanford University, Department of Economics.
- Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
- Spagnolo, Giancarlo & Albano, Gian Luigi & Bianchi, Milo, 2006.
"Bid avarage methods in Procurement,"
8997, University Library of Munich, Germany.
- Manelli, Alejandro M & Vincent, Daniel R, 1995.
"Optimal Procurement Mechanisms,"
Econometric Society, vol. 63(3), pages 591-620, May.
- Porter, Robert H & Zona, J Douglas, 1993.
"Detection of Bid Rigging in Procurement Auctions,"
Journal of Political Economy,
University of Chicago Press, vol. 101(3), pages 518-38, June.
- Dasgupta, Sudipto & Spulber, Daniel F., 1989. "Managing procurement auctions," Information Economics and Policy, Elsevier, vol. 4(1), pages 5-29.
- Patrick Bajari & Stephanie Houghton & Steve Tadelis, 2006. "Bidding for Incomplete Contracts: An Empirical Analysis," NBER Working Papers 12051, National Bureau of Economic Research, Inc.
- Yeon-Koo Che, 1993.
"Design Competition through Multidimensional Auctions,"
RAND Journal of Economics,
The RAND Corporation, vol. 24(4), pages 668-680, Winter.
When requesting a correction, please mention this item's handle: RePEc:fem:femwpa:2008.86. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (barbara racah)
If references are entirely missing, you can add them using this form.