IDEAS home Printed from https://ideas.repec.org/p/tiu/tiutil/78e45bf6-3a0a-46a0-9abd-78a8baa4e3ad.html
   My bibliography  Save this paper

On the Competitive Effects of Screening in Procurement

Author

Listed:
  • Seres, G.

    (Tilburg University, TILEC)

  • Pigon, Adam

Abstract

Procuring authorities frequently use screening in order to mitigate risky bids. This study estimates the effect of bid screening and litigation on entry and bidding using a unique data set on highway construction procurement auctions in Poland. The market exhibits a screening method that ex post selects eligible offers. We demonstrate with an empirical model that this method disproportionately affects small firms and creates a barrier to entry. Our results suggest that screening increases bids by two channels. First, it directly inflates bids as well as decreasing entry. Second, in a competitive market, lower entry also inflates bids and prices.

Suggested Citation

  • Seres, G. & Pigon, Adam, 2019. "On the Competitive Effects of Screening in Procurement," Discussion Paper 2019-009, Tilburg University, Tilburg Law and Economic Center.
  • Handle: RePEc:tiu:tiutil:78e45bf6-3a0a-46a0-9abd-78a8baa4e3ad
    as

    Download full text from publisher

    File URL: https://pure.uvt.nl/ws/portalfiles/portal/30132103/DP2019_009.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    2. Mireia Jofre-Bonet & Martin Pesendorfer, 2003. "Estimation of a Dynamic Auction Game," Econometrica, Econometric Society, vol. 71(5), pages 1443-1489, September.
    3. Susan Athey & Dominic Coey & Jonathan Levin, 2013. "Set-Asides and Subsidies in Auctions," American Economic Journal: Microeconomics, American Economic Association, vol. 5(1), pages 1-27, February.
    4. Tong Li & Xiaoyong Zheng, 2009. "Entry and Competition Effects in First-Price Auctions: Theory and Evidence from Procurement Auctions," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1397-1429.
    5. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 518-538, June.
    6. Samuelson, William F., 1985. "Competitive bidding with entry costs," Economics Letters, Elsevier, vol. 17(1-2), pages 53-57.
    7. Gregory Lewis & Patrick Bajari, 2014. "Moral Hazard, Incentive Contracts, and Risk: Evidence from Procurement," Review of Economic Studies, Oxford University Press, vol. 81(3), pages 1201-1228.
    8. John Asker & Estelle Cantillon, 2008. "Properties of scoring auctions," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 69-85, March.
    9. John Asker & Estelle Cantillon, 2010. "Procurement when price and quality matter," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 1-34, March.
    10. Francesco Decarolis, 2014. "Awarding Price, Contract Performance, and Bids Screening: Evidence from Procurement Auctions," American Economic Journal: Applied Economics, American Economic Association, vol. 6(1), pages 108-132, January.
    11. Elena Krasnokutskaya & Katja Seim, 2011. "Bid Preference Programs and Participation in Highway Procurement Auctions," American Economic Review, American Economic Association, vol. 101(6), pages 2653-2686, October.
    12. Dakshina De Silva & Thomas Jeitschko & Georgia Kosmopoulou, 2009. "Entry and Bidding in Common and Private Value Auctions with an Unknown Number of Rivals," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 73-93, September.
    13. Luigi Moretti & Paola Valbonesi, 2015. "Firms’ Qualifications and Subcontracting in Public Procurement: An Empirical Investigation," Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(3), pages 568-598.
    14. De Silva, Dakshina G. & Dunne, Timothy & Kankanamge, Anuruddha & Kosmopoulou, Georgia, 2008. "The impact of public information on bidding in highway procurement auctions," European Economic Review, Elsevier, vol. 52(1), pages 150-181, January.
    15. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721.
    16. Francesco Decarolis & Leonardo M. Giuffrida & Elisabetta Iossa & Vincenzo Mollisi & Giancarlo Spagnolo, 2018. "Bureaucratic Competence and Procurement Outcomes," NBER Working Papers 24201, National Bureau of Economic Research, Inc.
    17. Luigi Moretti & Paola Valbonesi, 2015. "Firms’ Qualifications and Subcontracting in Public Procurement: An Empirical Investigation," Journal of Law, Economics, and Organization, Oxford University Press, vol. 31(3), pages 568-598.
    18. Philippe Gillen & Vitali Gretschko & Alexander Rasch, 2017. "Pre-auction or post-auction qualification?," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(2), pages 139-150, October.
    19. Dimitri,Nicola & Piga,Gustavo & Spagnolo,Giancarlo (ed.), 2006. "Handbook of Procurement," Cambridge Books, Cambridge University Press, number 9780521870733.
    20. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    21. Patrick Bajari & Stephanie Houghton & Steven Tadelis, 2014. "Bidding for Incomplete Contracts: An Empirical Analysis of Adaptation Costs," American Economic Review, American Economic Association, vol. 104(4), pages 1288-1319, April.
    22. Gugler, Klaus & Weichselbaumer, Michael & Zulehner, Christine, 2015. "Competition in the economic crisis: Analysis of procurement auctions," European Economic Review, Elsevier, vol. 73(C), pages 35-57.
    23. Daniel P. Miller, 2014. "Subcontracting and competitive bidding on incomplete procurement contracts," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 705-746, December.
    24. Nicola Branzoli & Francesco Decarolis, 2015. "Entry and Subcontracting in Public Procurement Auctions," Management Science, INFORMS, vol. 61(12), pages 2945-2962, December.
    25. Coviello, Decio & Mariniello, Mario, 2014. "Publicity requirements in public procurement: Evidence from a regression discontinuity design," Journal of Public Economics, Elsevier, vol. 109(C), pages 76-100.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    procurement; auctions; market design; litigation;

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • L5 - Industrial Organization - - Regulation and Industrial Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tiu:tiutil:78e45bf6-3a0a-46a0-9abd-78a8baa4e3ad. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Broekman). General contact details of provider: https://www.tilburguniversity.edu/research/institutes-and-research-groups/center-ar/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.