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Resident Bid Preference, Affiliation, and Procurement Competition: Evidence from New Mexico

Rosa, Benjamin (2016): Resident Bid Preference, Affiliation, and Procurement Competition: Evidence from New Mexico.

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Abstract

In public procurement auctions, governments occasionally offer preferences to qualified firms in the form of bid discounts. Previous studies on bid discounts do not account for affiliation -- a particular form of cost dependence that is likely to occur in a public procurement setting. Utilizing data from the New Mexico Department of Transportation's Resident Preference Program, this paper addresses that issue via an empirical model of firm bidding and entry behavior that allows for affiliation and bid discounting. I find evidence that firms have affiliated project-completion costs and show how this type of affiliation changes preference auction outcomes.

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