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Bidders' entry and auctioneer's rejection: Applying a double selection model to road procurement auctions

Author

Listed:
  • Antonio Estache
  • Atsushi Iimi

Abstract

Public procurement is a dynamic process involving vendors, contractors and procuring agencies. Even before submitting bids, competition among contractors may already have started. Given the nature of public work and expected strategies of rivals, some firms decide to enter the market, but others do not. Procurers can also enhance or limit the bidder participation through various ex ante qualification procedures for quality assurance purposes. Some applicants are qualified, but others are not. Thus, the selection process has two dimensions: bidders self-select, and an auctioneer may (dis)qualify some applicants. The paper explores this selection dynamics, using procurement data from road projects in developing countries. It shows that bidders are selecting themselves; low-cost firms are more prone to enter the market. But they are more likely to be rejected for technical reasons. Procurement design, such as contract size, and public governance are also found important determinants of the entry strategy of firms. © 2011 Universidad del CEMA.

Suggested Citation

  • Antonio Estache & Atsushi Iimi, 2011. "Bidders' entry and auctioneer's rejection: Applying a double selection model to road procurement auctions," ULB Institutional Repository 2013/169110, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/169110
    Note: SCOPUS: ar.j
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    Cited by:

    1. Estache, Antonio & Iimi, Atsushi, 2011. "(Un)bundling infrastructure procurement: Evidence from water supply and sewage projects," Utilities Policy, Elsevier, vol. 19(2), pages 104-114, June.
    2. Antonio Estache & Renaud Foucart & Tomas Serebrisky, 2024. "Can Lotteries help fix Procurement Failures? A Review of Theory and Evidence," Working Papers ECARES 2024-18, ULB -- Universite Libre de Bruxelles.
    3. Nakanishi, Yoshinobu, 2022. "Determinants of the number of bidders and win-reserve ratio in open competitive tendering: Relationship-specific investments and incomplete contracts," Japan and the World Economy, Elsevier, vol. 63(C).
    4. Takano, Guillermo, 2021. "The competitive performance of public-private partnership markets. The case of unsolicited proposals in Peru," Utilities Policy, Elsevier, vol. 72(C).
    5. Kacandolli-Gjonbalaj Drita & Shiroka-Pula Justina & Berisha-Shaqiri Afërdita & Osmani Myslym, 2018. "The Efficiency of Public Procurement in the Republic of Kosovo: An Econometric Approach," Ekonomika (Economics), Sciendo, vol. 97(2), pages 70-90, December.
    6. Lobna AbdelLatif & Mohamed Zaky, 2013. "The Macro-Micro Nexus and Public Procurement Support Policy for SMEs: The Case of Pharmaceuticals in Egypt," Working Papers 818, Economic Research Forum, revised Dec 2013.

    More about this item

    Keywords

    Auction theory; Endogenous bidder entry; Infrastructure development; Public procurement;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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