Reputation, Competition, and Entry in Procurement

Stockholm Institute of Transition Economics Working Paper No 14

17 Pages Posted: 21 Jan 2012

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Date Written: January 20, 2012


Abstract: Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation constrains the use of past performance information to select contractors while in the US its use is encouraged. I present some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and discuss the complementary roles of discretion and restricted competition in reinforcing relational/reputational forces, both in theory and in a new empirical study on the effects restricted rather than open auctions. I conclude reporting preliminary results form a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than hindering new entry.

Keywords: Accountability, Discretion, Entry, Incomplete contracts, Limited enforcement, Past performance, Procurement, Quality, Relational contracts, Reputation, Restricted auctions

JEL Classification: H57, L14, L15, L24

Suggested Citation

Spagnolo, Giancarlo, Reputation, Competition, and Entry in Procurement (January 20, 2012). Stockholm Institute of Transition Economics Working Paper No 14, Available at SSRN: or

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501

HOME PAGE: http://

Centre for Economic Policy Research (CEPR)

United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
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Rome, RM 00133

EIEF ( email )

Via Due Macelli, 73
Rome, 00187


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