What Allotment and Subcontracting in Procurement Bidding
Allotment and subcontracting are the two alternative mechanisms enabling the participation of SMEs in procurement. We compare these two alternatives in the context of a procurement contract awarded by a first-price sealed-bid auction. When the winning large firm is constrained with respect to the degree of subcontracting, we show that only a reduction of the chosen SME's profit can reduce the expected cost of the contract. However, when the large firm is allowed to choose the subcontracting level, subcontracting can be a Pareto dominating mechanism, i.e. simultaneously increasing both firms' profits and reducing the expected total cost of the contract.
|Date of creation:||May 2004|
|Date of revision:|
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- François Marechal & Pierre-Henri Morand, 2003.
"Pre vs. post-award subcontracting plans in procurement bidding,"
- Marechal, Francois & Morand, Pierre-Henri, 2003. "Pre vs. post-award subcontracting plans in procurement bidding," Economics Letters, Elsevier, vol. 81(1), pages 23-30, October.
- François Marechal & Pierre-Henri Morand, 2003. "Pre vs. post-award subcontracting plans in procurement bidding," Post-Print hal-01313424, HAL.
- Paul Klemperer, 1999.
"Auction Theory: A Guide to the Literature,"
- Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Economics Series Working Papers 1999-W12, University of Oxford, Department of Economics.
- Klemperer, Paul, 1999. "Auction Theory: a Guide to the Literature," CEPR Discussion Papers 2163, C.E.P.R. Discussion Papers.
- Pierre-Henri Morand, 2003.
"SMEs and public procurement policy,"
Review of Economic Design,
Springer;Society for Economic Design, vol. 8(3), pages 301-318, October.
- Yun, Mikyung, 1999. "Subcontracting relations in the Korean automotive industry: risk sharing and technological capability," International Journal of Industrial Organization, Elsevier, vol. 17(1), pages 81-108, January.
- Kawasaki, Seiichi & McMillan, John, 1987. "The design of contracts: Evidence from Japanese subcontracting," Journal of the Japanese and International Economies, Elsevier, vol. 1(3), pages 327-349, September.
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