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Incentives For Repeated Contracts In Public Sector: Empirical Study Of Gasoline Procurement In Russia

Author

Listed:
  • Andrei Yakovlev

    () (National Research University Higher School of Economics)

  • Oleg Vyglovsky

    () (National Research University Higher School of Economics)

  • Olga Demidova

    () (National Research University Higher School of Economics)

  • Alexander Bashlyk

    () (National Research University Higher School of Economics)

Abstract

This paper analyzes the phenomenon of repeated procurements made by public sector customers from the same supplier. The previous surveys of “relational contracts” gave different explanations for the possible implications of such repeated procurements, but those surveys dealt mostly with goods and services, with quality difficult to verify at the point of delivery. This work studies the impact of repeated procurements on the price of a simple homogeneous product. We presume that the downward price shift of such a product during repeated procurements can be the consequence of transaction costs reduction in the framework of the bona fide behavior of a customer and supplier. An upward shift in the prices as compared to the market average can, on the contrary, be interpreted as an indirect indication of corrupt collusion between them. Using a huge dataset on procurements of AI-92 gasoline in Russia in 2011, we show that the price difference between repeated and one-time contracts can be explained by the type of procurement procedures providing different opportunities for corrupt behavior. Less transparent procedures (single-sourcing and requests for quotations) are more suitable for corrupt collusion. This might explain why the prices of repeat contracts in this case were higher. On the contrary, the prices of repeat contracts were lower compared to one-time procurement in the case of more transparent e-auctions.

Suggested Citation

  • Andrei Yakovlev & Oleg Vyglovsky & Olga Demidova & Alexander Bashlyk, 2015. "Incentives For Repeated Contracts In Public Sector: Empirical Study Of Gasoline Procurement In Russia," HSE Working papers WP BRP 24/PA/2015, National Research University Higher School of Economics.
  • Handle: RePEc:hig:wpaper:24/pa/2015
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    File URL: http://www.hse.ru/data/2015/01/12/1106453111/24PA2015.pdf
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    References listed on IDEAS

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    1. Celentani, Marco & Ganuza, Juan-Jose, 2002. "Corruption and competition in procurement," European Economic Review, Elsevier, vol. 46(7), pages 1273-1303, July.
    2. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Auction design and favoritism," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 9-42, March.
    3. James M. MacDonald & Charles R. Handy & Gerald E. Plato, 2002. "Competition and Prices in USDA Commodity Procurement," Southern Economic Journal, Southern Economic Association, vol. 69(1), pages 128-143, July.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. David Szakonyi, 2018. "Private Sector Policymaking," Working Papers 2018-8, The George Washington University, Institute for International Economic Policy.
    2. Dmitry I. Ivanov & Alexander S. Nesterov, 2019. "Identifying Bid Leakage In Procurement Auctions: Machine Learning Approach," Papers 1903.00261, arXiv.org.
    3. Eremina, Anastasia & Zoroastrova, Irina & Maksimov, Andrey, 2018. "Empirical analysis of municipal peculiarities influence on price outcomes of public purchases," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 51, pages 84-101.

    More about this item

    Keywords

    public procurement; repeated contracts; relational contracting; corruption; e-auction;

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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