The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions

Athias, Laure and Nunez, Antonio (2008): The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions.

Abstract

We empirically assess the winner’s curse effect in auctions for toll road concessions. First, we investigate the overall winner’s curse effects on bidding behaviour. Second, we account for differing levels of common-value components. Third, we investigate whether the possibility of renegotiation affects the winner’s curse effect. Using a unique dataset of 49 concessions, we show that the winner’s curse effect is particularly strong, i.e. bidders bid less aggressively when they expect more competition. In addition, we observe that this effect is larger for projects where the common uncertainty is greater, and is dampened in weaker institutional frameworks, in which renegotiations are easier.

• Item Type: MPRA Paper
• Language: English
• Keywords: Winner’s curse; Common value auction; Public Private Partnerships; incomplete contract.
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H57 - Procurement; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D44 - Auctions; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D82 - Asymmetric and Private Information ; Mechanism Design

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