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Does Publicity Affect Competition? Evidence from Discontinuities in Public Procurement Auctions

Calls for tenders are the natural devices to inform bidders, thus to enlarge the pool of potential participants. We exploit discontinuities generated by the Italian Law on tender’s publicity to identify the effect of enlarging the pool of potential participants on competition in public procurement auctions. We show that most of the effects of publicity are at regional and European level. Increasing tenders’ publicity from local to regional determines an increase in the number of bidders by 50% and an extra reduction of 5% in the price paid by the contracting authority; increasing publicity from national to European has no effect on the number of bidders but it determines an extra reduction of 10% in the price paid by the contracting authority. No effect is observed when publicity is increased from regional to national. Finally, we relate measures of competition to ex-post duration of the works finding a negative correlation between duration and the number of bidders or the winning rebate.

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Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 189.

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Date of creation: 15 Jan 2008
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Handle: RePEc:sef:csefwp:189
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  1. Pietro Garibaldi & Francesco Giavazzi & Andrea Ichino & Enrico Rettore, 2007. "College Cost and Time to Complete a Degree: Evidence from Tuition Discontinuities," NBER Working Papers 12863, National Bureau of Economic Research, Inc.
  2. Paul Klemperer, 2002. "What Really Matters in Auction Design," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 169-189, Winter.
  3. Joshua D. Angrist & Victor Lavy, 1999. "Using Maimonides' Rule To Estimate The Effect Of Class Size On Scholastic Achievement," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 533-575, May.
  4. Juan José Ganuza, 2003. "Competition and cost overruns in procurement," Economics Working Papers 772, Department of Economics and Business, Universitat Pompeu Fabra.
  5. O. Compte & A. Lambert-Mogiliansky & T. Verdier, 2005. "Corruption and Competition in Procurement Auctions," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 1-15, Spring.
  6. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
  7. Patrick Bajari & Ali Hortacsu, 2000. "Winner's Curse, Reserve Prices and Endogenous Entry: Empirical Insights from eBay Auctions," Econometric Society World Congress 2000 Contributed Papers 1927, Econometric Society.
  8. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc.
  9. Paul Klemperer, 2000. "What Really Matters in Auction Design," Economics Series Working Papers 2000-W26, University of Oxford, Department of Economics.
  10. Spagnolo, Giancarlo & Albano, Gian Luigi & Bianchi, Milo, 2006. "Bid avarage methods in Procurement," MPRA Paper 8997, University Library of Munich, Germany.
  11. Sofia Lundberg, 2005. "Restrictions on Competition in Municipal Competitive Procurement in Sweden," International Advances in Economic Research, International Atlantic Economic Society, vol. 11(3), pages 329-342, August.
  12. Menezes, F.M. & Monteiro, P.K., 1996. "A Note on Auctions with Endogenous Participation," Papers 312, Australian National University - Department of Economics.
  13. Angrist, Joshua D & Graddy, Kathryn & Imbens, Guido W, 2000. "The Interpretation of Instrumental Variables Estimators in Simultaneous Equations Models with an Application to the Demand for Fish," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 499-527, July.
  14. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
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