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Auction versus Negotiation in Public Procurement: Looking for Empirical Evidence

Listed author(s):
  • Eshien Chong


    (ADIS - UP11 - Université Paris-Sud - Paris 11)

  • Carine Staropoli


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Anne Yvrande-Billon


    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

The relative efficiency of auctions and negotiations is still a puzzle in the literature. While auctions are the prescribed procedures and the most used ones for public procurement, in the private sector, where buyers are free to choose their purchasing method, competitive tendering is far from being their preferred option (Bajari et al. 2009). In addition, recent empirical studies (Estache et al. 2009, Bajari et al. 2009) highlight some failures of auction procedures and identify conditions under which negotiation is more efficient. In particular, they show that auctions perform poorly when projects are complex. In this paper, our aim is to contribute to this debate by providing an empirical analysis of how awarding mechanisms are chosen in public procurement in France. To this end, we examine a comprehensive database of 76,188 observations corresponding to the entire set of public procurement work contracts awarded between 2005 and 2007 in the construction sector. We find empirical regularities regarding the choice of awarding procedures by public buyers. However, most of these regularities do not coincide with what the theoretical literature considers as transaction-cost minimizing behaviours. In particular, the size of the construction projects as well as the length of contracts do not appear as key determinants of the choice of awarding procedures, which translates into costly renegotiations.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00512813.

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Date of creation: 2014
Publication status: Published in E. Brousseau et J-M. Glachant. The Manufacturing Markets, Legal, Political and Economic Dynamics, Cambridge University Pres, pp.120-142, 2014, 9781107053717
Handle: RePEc:hal:cesptp:hal-00512813
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  1. repec:pse:psecon:2005-25 is not listed on IDEAS
  2. Ariane Lambert-Mogiliansky & Konstantin Sonin, 2005. "Collusive market-sharing and corruption in procurement," PSE Working Papers halshs-00590773, HAL.
  3. Juan José Ganuza, 2003. "Competition and cost overruns in procurement," Economics Working Papers 772, Department of Economics and Business, Universitat Pompeu Fabra.
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