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The Effect of Discretion on Procurement Performance

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Abstract

We run a regression discontinuity design analysis to document the causal effect of increasing buyers' discretion on procurement outcomes in a large database for public works in Italy. Works with a value above a given threshold have to be awarded through an open auction. Works below this threshold can be more easily awarded through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid. Our main result is that discretion increases the probability that the same firm wins repeatedly, and it does not deteriorate (and may improve) the procurement outcomes we observe. The effects of discretion persist when we repeat the analysis controlling for the geographical location, corruption, social capital and judicial efficiency in the region of the public buyers running the auctions.

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  • Decio Coviello & Andrea Guglielmo & Giancarlo Spagnolo, 2015. "The Effect of Discretion on Procurement Performance," CEIS Research Paper 361, Tor Vergata University, CEIS, revised 17 Nov 2015.
    • Handle: RePEc:rtv:ceisrp:361
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    1. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stephane, 2003. "Renegotiation of concession contracts in Latin America," Policy Research Working Paper Series 3011, The World Bank.
    2. Jeremy Bulow & Paul Klemperer, 2009. "Why Do Sellers (Usually) Prefer Auctions?," American Economic Review, American Economic Association, vol. 99(4), pages 1544-75, September.
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    1. Werner Hölzl & Michael Böheim & Michael Klien & Eva Pichler, 2017. "Das öffentliche Beschaffungswesen im Spannungsfeld zwischen Billigst- und Bestbieterprinzip," WIFO Studies, WIFO, number 59256.
    2. Decio Coviello & Luigi Moretti & Giancarlo Spagnolo & Paola Valbonesi, 2018. "Court Efficiency and Procurement Performance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 826-858, July.
    3. Leonardo M. Giuffrida & Gabriele Rovigatti, 2017. "Can the Private Sector Ensure the Public Interest? Evidence from Federal Procurement," CEIS Research Paper 411, Tor Vergata University, CEIS, revised 20 Jul 2017.
    4. Ari Hyytinen & Sofia Lundberg & Otto Toivanen, 2018. "Design of public procurement auctions: evidence from cleaning contracts," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 398-426, June.
    5. 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.
    6. Spagnolo, Giancarlo & Decarolis, Francesco & Iossa, Elisabetta & Mollisi, Vincenzo & Giuffrida, Leonardo, 2016. "Buyer Quality and Procurement Outcomes: Explorative Evidence From the US," SITE Working Paper Series 41, Stockholm School of Economics, Stockholm Institute of Transition Economics.
    7. Maria Paula Gerardino & Stephan Litschig & Dina Pomeranz, 2024. "Distortion by Audit: Evidence from Public Procurement," American Economic Journal: Applied Economics, American Economic Association, vol. 16(4), pages 71-108, October.

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    More about this item

    Keywords

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    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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