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Auction versus Negotiation in Public Procurement: Looking for Empirical Evidence

Author

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  • 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)

Abstract

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.

Suggested Citation

  • Eshien Chong & Carine Staropoli & Anne Yvrande-Billon, 2014. "Auction versus Negotiation in Public Procurement: Looking for Empirical Evidence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00512813, HAL.
  • Handle: RePEc:hal:cesptp:hal-00512813
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00512813
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    References listed on IDEAS

    as
    1. Juan José Ganuza, 2003. "Competition and cost overruns in procurement," Economics Working Papers 772, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Ariane Lambert-Mogiliansky & Konstantin Sonin, 2006. "Collusive Market Sharing and Corruption in Procurement," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 883-908, December.
    3. repec:pse:psecon:2005-25 is not listed on IDEAS
    4. Ariane Lambert-Mogiliansky & Konstantin Sonin, 2006. "Collusive Market Sharing and Corruption in Procurement," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 883-908, December.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Calogero Guccio & Giacomo Pignataro & Ilde Rizzo, 2014. "Evaluating the efficiency of public procurement contracts for cultural heritage conservation works in Italy," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 38(1), pages 43-70, February.
    2. Stéphane Saussier & Carine Staropoli & Anne Yvrande-Billon, 2009. "Public–Private Agreements, Institutions, and Competition: When Economic Theory Meets Facts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 1-18, September.
    3. C. Guccio & G. Pignataro & I. Rizzo, 2012. "Determinants of adaptation costs in procurement: an empirical estimation on Italian public works contracts," Applied Economics, Taylor & Francis Journals, vol. 44(15), pages 1891-1909, May.
    4. Gregory E. Kersten & Tomasz Wachowicz & Margaret Kersten, 2016. "Competition, Transparency, and Reciprocity: A Comparative Study of Auctions and Negotiations," Group Decision and Negotiation, Springer, vol. 25(4), pages 693-722, July.
    5. Miguel Vazquez & Michelle Hallack, 2017. "Efficiency versus transaction costs in multidimensional auctions: the case of Brazilian oil and gas lease auctions," IEFE Working Papers 94, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    6. Baldi, Simona & Bottasso, Anna & Conti, Maurizio & Piccardo, Chiara, 2016. "To bid or not to bid: That is the question: Public procurement, project complexity and corruption," European Journal of Political Economy, Elsevier, vol. 43(C), pages 89-106.

    More about this item

    Keywords

    Auctions; Public Procurement; Contract Theories;

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