Assessing social costs of inefficient procurement design
2005 (English)In: Journal of the European Economic Association, ISSN 1542-4766, Vol. 3, no 4, 826-850 p.Article in journal (Refereed) Published
This paper considers the social costs implied by inefficient allocation of contracts in a first-price, sealed-bid procurement auction with asymmetric bidders. We adopt a constrained (piecewise linear) strategye quilibriumc oncept and estimatet he structural parameterso f the bidders'd is-tribution of costs. We estimate social costs defined as the predicted cost difference between the winning firm and the most efficient bidding firm. We also compare the expected procurement costs under two different auction formats. The data is collected from procurement auctions of road painting in Sweden during 1993-1999. The results indicate that the social costs of inefficient contract allocation is about 2% of total potential production cost and that an effi-cient second-pricea uction would lower the expected procurementc ost by 2.5%. (JEL:D 44, H57, C15)
Place, publisher, year, edition, pages
2005. Vol. 3, no 4, 826-850 p.
Research subject Economics
IdentifiersURN: urn:nbn:se:uu:diva-108631OAI: oai:DiVA.org:uu-108631DiVA: diva2:236748