Spagnolo, Giancarlo and Albano, Gian Luigi and Bianchi, Milo (2006): Bid avarage methods in Procurement. Published in: Rivista di politica economica No. No. I – II : pp. 41-64.
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Procurement awarding mechanisms based on average price have been advocated to soften price competition and reduce cost overruns. We show that their theoretical support is shaky. When the bid closest to the average is awarded, firms submit identical bids, making the selection extremely costly and random, without reducing opportunistic behaviors ex-post. When instead the bid closest and below the average is awarded, the equilibrium is very sensitive to firms’ production and participation costs. Either it displays tougher competition than in a first price auction, or it induces firms to randomize their bids.
|Item Type:||MPRA Paper|
|Original Title:||Bid avarage methods in Procurement|
|Subjects:||D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
H - Public Economics > H7 - State and Local Government; Intergovernmental Relations > H76 - State and Local Government: Other Expenditure Categories
|Date Deposited:||07. Jun 2008 05:27|
|Last Modified:||12. Feb 2013 10:51|
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