IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/4853.html
   My bibliography  Save this paper

Auctions with endogenous participation and quality thresholds : evidence from ODA infrastructure procurement

Author

Listed:
  • Estache, Antonio
  • Iimi, Atsushi

Abstract

Infrastructure projects are often technically complicated and highly customized. Therefore, procurement competition tends to be limited. Competition is the single most important factor toward auction efficiency and anti-corruption. However, the degree of competition realized is closely related to bidders'entry decision and the auctioneer's decision on how to assess technical attributes in the bid evaluation process. This paper estimates the interactive effects among quality, entry, and competition. With data on procurement auctions for electricity projects in developing countries, it is found that large electricity works are by nature costly and can attract only a few participants. The limited competition would raise government procurement costs. In addition, high technical requirements are likely to be imposed for these large-scale projects, which will in turn add extra costs for the better quality of works and further limit bidder participation. The evidence suggests that quality is of particular importance in large infrastructure projects and auctioneers cannot easily substitute price for quality.

Suggested Citation

  • Estache, Antonio & Iimi, Atsushi, 2009. "Auctions with endogenous participation and quality thresholds : evidence from ODA infrastructure procurement," Policy Research Working Paper Series 4853, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4853
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/03/04/000158349_20090304110004/Rendered/PDF/WPS4853.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Estache, Antonio & Iimi, Atsushi, 2008. "Procurement efficiency for infrastructure development and financial needs reassessed," Policy Research Working Paper Series 4662, The World Bank.
    2. Che, Yeon-Koo & Kim, Jinwoo, 2009. "Optimal collusion-proof auctions," Journal of Economic Theory, Elsevier, vol. 144(2), pages 565-603, March.
    3. Yeon-Koo Che, 1993. "Design Competition through Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 668-680, Winter.
    4. 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.
    5. Cripps, Martin & Ireland, Norman, 1994. "The Design of Auctions and Tenders with Quality Thresholds: The Symmetric Case," Economic Journal, Royal Economic Society, vol. 104(423), pages 316-326, March.
    6. McAfee, R. Preston & McMillan, John, 1987. "Auctions with entry," Economics Letters, Elsevier, vol. 23(4), pages 343-347.
    7. Michael K. Price, 2008. "Using The Spatial Distribution Of Bidders To Detect Collusion In The Marketplace: Evidence From Timber Auctions," Journal of Regional Science, Wiley Blackwell, vol. 48(2), pages 399-417, May.
    8. Antonio Estache & Atsushi Iimi, 2010. "Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(2), pages 163-187, March.
    9. Atsushi Iimi, 2006. "Auction Reforms for Effective Official Development Assistance," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 28(2), pages 109-128, March.
    10. Klein, Michael, 1998. "Bidding for concessions," Policy Research Working Paper Series 1957, The World Bank.
    11. Antonio Estache & Jose-Luis Guasch & Atsushi Iimi & Lourdes Trujillo, 2009. "Multidimensionality and Renegotiation: Evidence from Transport-Sector Public-Private-Partnership Transactions in Latin America," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 41-71, September.
    12. Robert H. Porter & J. Douglas Zona, 1999. "Ohio School Milk Markets: An Analysis of Bidding," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 263-288, Summer.
    13. Hendricks, Kenneth & Porter, Robert H, 1992. "Joint Bidding in Federal OCS Auctions," American Economic Review, American Economic Association, vol. 82(2), pages 506-511, May.
    14. Rajiv Vohra & In-Koo Cho & Kevin Jewell, 2002. "A simple model of coalitional bidding," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 19(3), pages 435-457.
    15. Steven Tadelis, 2009. "Auctions Versus Negotiations in Procurement: An Empirical Analysis," Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 372-399, October.
    16. Estache, Antonio & Iimi, Atsushi, 2008. "Joint bidding in infrastructure procurement," Policy Research Working Paper Series 4664, The World Bank.
    17. C.E. Moody Jr. & W.J. Kruvant, 1988. "Joint Bidding, Entry, and the Price of OCS Leases," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 276-284, Summer.
    18. Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-599, June.
    19. Srabana Gupta, 2002. "Competition and collusion in a government procurement auction market," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(1), pages 13-25, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Takano, Guillermo, 2017. "Public-Private Partnerships as rent-seeking opportunities: A case study on an unsolicited proposal in Lima, Peru," Utilities Policy, Elsevier, vol. 48(C), pages 184-194.
    2. Arno Van Der Vlist & Sander Hardeman, 2011. "On the Design of Public Infrastructure procurements," ERSA conference papers ersa10p1060, European Regional Science Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Iimi, Atsushi, 2004. "(Anti-)Competitive effect of joint bidding: evidence from ODA procurement auctions," Journal of the Japanese and International Economies, Elsevier, vol. 18(3), pages 416-439, September.
    2. 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.
    3. Atsushi Iimi, 2007. "Aid and competition in procurement auctions: a case of highway projects," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(7), pages 997-1015.
    4. Antonio Estache & Atsushi Iimi, 2009. "Joint Bidding, Governance And Public Procurement Costs:A Case Of Road Projects," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(3), pages 393-429, September.
    5. Atsushi Iimi, 2013. "Testing Low-Balling Strategy in Rural Road Procurement," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(3), pages 243-261, November.
    6. Antonio Estache & Atsushi Iimi, 2010. "Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(2), pages 163-187, March.
    7. Amaral, Miguel & Saussier, Stéphane & Yvrande-Billon, Anne, 2009. "Auction procedures and competition in public services: The case of urban public transport in France and London," Utilities Policy, Elsevier, vol. 17(2), pages 166-175, June.
    8. Estache, Antonio & Iimi, Atsushi, 2008. "Procurement efficiency for infrastructure development and financial needs reassessed," Policy Research Working Paper Series 4662, The World Bank.
    9. Jean-Jacques Laffont, 1998. "Théorie des jeux et économie empirique : le cas des données issues d'enchères," Économie et Prévision, Programme National Persée, vol. 132(1), pages 121-137.
    10. Quang Vuong & Sandra Campo & Isabelle Perrigne, 2003. "Asymmetry in first-price auctions with affiliated private values," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(2), pages 179-207.
    11. Huang, Yangguang, 2019. "An empirical study of scoring auctions and quality manipulation corruption," European Economic Review, Elsevier, vol. 120(C).
    12. Eshien Chong & Carine Staropoli & Anne Yvrande-Billon, 2014. "Auction versus Negotiation in Public Procurement: Looking for Empirical Evidence," Post-Print hal-00512813, HAL.
    13. İlke Onur & Rasim Özcan & Bedri Taş, 2012. "Public Procurement Auctions and Competition in Turkey," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 40(3), pages 207-223, May.
    14. Hu, Audrey & Offerman, Theo & Onderstal, Sander, 2011. "Fighting collusion in auctions: An experimental investigation," International Journal of Industrial Organization, Elsevier, vol. 29(1), pages 84-96, January.
    15. Paul Klemperer, 2007. "Bidding Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 3(1), pages 1-47.
    16. Loyola, Gino, 2008. "On bidding markets: the role of competition," UC3M Working papers. Economics we083318, Universidad Carlos III de Madrid. Departamento de Economía.
    17. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    18. Gian Luigi Albano & Federico Dini & Roberto Zampino, 2008. "Bidding for Complex Projects: Evidence From the Acquisitions of IT Services," Working Papers 2008.86, Fondazione Eni Enrico Mattei.
    19. Hiroshi Ohashi, 2009. "Effects of Transparency in Procurement Practices on Government Expenditure: A Case Study of Municipal Public Works," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(3), pages 267-285, May.
    20. Atsushi Iimi, 2016. "Multidimensional Auctions for Public Energy Efficiency Projects: Evidence from Japanese Esco Market," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(3), pages 491-514, November.

    More about this item

    Keywords

    Government Procurement; Investment and Investment Climate; E-Business; Markets and Market Access; Economic Theory&Research;
    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

    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:wbk:wbrwps:4853. 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: . General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    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.