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Efficient design of set-aside auctions for small businesses: an empirical analysis

Author

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  • Andrey Tkachenko

    (National Research University Higher School of Economics, Russian Federation and Bocconi University)

  • Paola Valbonesi

    (Department of Economics and Management, University of Padova and National Research University Higher School of Economics, Russian Federation)

  • Elena Shadrina

    (National Research University Higher School of Economics, Russian Federation)

  • Gegam Shagbazian

    (Department of Economics and Management, University of Padova)

Abstract

Government support to small business enterprises (SBEs) through set-aside (SA) public procurement auctions is a common practice. The effect of the SA mechanism is, however, ambiguous. On the one hand, SA auctions can attract more SBEs to compete; on the other hand, SA auctions restrict the entry of—possibly—more cost-efficient large firms. We investigate SA auctions’ effect by exploiting an original Russian database on public procurement e-auctions for granulated sugar (a largely homogeneous good) in the period 2011-2013. To identify the causal effect of SA auctions, we overcome two endogeneity issues: procurers’ choice of SA format and firms’ decision to bid. In an empirical setting where confounding elements are minimized, we found that SA auctions’ effect largely depends on both the reserve price value and the level of competition. We found that there exists an optimal interval for the reserve price where SA auctions record lower procurement prices, as compared to non-SA auctions.

Suggested Citation

  • Andrey Tkachenko & Paola Valbonesi & Elena Shadrina & Gegam Shagbazian, 2019. "Efficient design of set-aside auctions for small businesses: an empirical analysis," "Marco Fanno" Working Papers 0240, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0240
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    References listed on IDEAS

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    More about this item

    Keywords

    affirmative action; preferential treatment; public procurement; set-aside auctions; e-auctions; small businesses enterprises (SBEs); small and medium-sized enterprises (SMEs);
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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