Bid Costs and the (In)efficiency of Public Procurement Auctions

Arbeitspapier

The paper analyzes the excess entry hypothesis for sealed-bid first price public procurement auctions.The hypothesis is proved analytically for any feasible combination of bid preparation cost and bid evaluation cost when the bidders face a rectangular cost density function and confirmed in numerical simulations based on a family of flexible cost density functions. The excess entry hypothesis implies that the procurer may reduce both his own cost and the social cost by imposing a positive fee on the bids. Sequential search is a superior strategy to a public procurement auction whether or not the procurer imposes an optimal fee on the bids.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working paper ; No. 1-2019

Classification and Topics

• Classification: Wirtschaft ; Firm Behavior: Theory ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Auctions ; Oligopoly and Other Imperfect Markets ; Economics of Regulation
• Subject: Excess entry ; Public procurement auctions ; Optimal fee ; Sequential search

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Blomgren-Hansen, Niels
• Event: Veröffentlichung
• (who): Copenhagen Business School (CBS), Department of Economics
• (where): Frederiksberg
• (when): 2019

Further information

• Handle: http://hdl.handle.net/10419/208592
• Last update: 10.03.2025, 11:44 AM CET