Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders?

24 Pages Posted: 20 Apr 2016

See all articles by Antonio Estache

Antonio Estache

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Atsushi Iimi

International Monetary Fund (IMF); World Bank

Date Written: July 1, 2008

Abstract

Asymmetric auctions are among the most rapidly growing areas in the auction literature. The potential benefits from improved auction efficiency are expected to be enormous in public procurement auctions related to official development projects. Entrant bidders are considered a key to enhance competition in an auction and break potential collusive arrangements among incumbent bidders. Asymmetric auction theory predicts that weak (fringe) bidders would bid more aggressively when they are faced with a strong (incumbent) opponent. Using official development assistance procurement data, this paper finds that in the major infrastructure sectors, entrants submitted systematically aggressive bids in the presence of an incumbent bidder. The findings also show that a high concentration of incumbents in an auction would harm auction efficiency, raising procurement costs. The results suggest that auctioneers should encourage fringe bidders to actively participate in the bidding process while maintaining the quality of the projects. This is conducive to enhancing competitive circumstances in public procurements and improving allocative efficiency.

Keywords: Investment and Investment Climate, Government Procurement, Debt Markets, E-Business, Infrastructure Economics

Suggested Citation

Estache, Antonio and Iimi, Atsushi, Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders? (July 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1157128

Antonio Estache (Contact Author)

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium
32 (0)2 6503838 (Phone)

Atsushi Iimi

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

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