Bidders’ Entry and Auctioneer’s Rejection: Applying a Double Selection Model to Road Procurement Auctions

Journal of Applied Economics, Vol XIV, No. 2 (November 2011), 199-223

Posted: 22 May 2012

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: November 1, 2011

Abstract

Public procurement is a dynamic process involving vendors, contractors and procuring agencies.

Even before submitting bids, competition among contractors may already have started. Given the nature of public work and expected strategies of rivals, some firms decide to enter the market, but others do not. Procurers can also enhance or limit the bidder participation through various ex ante qualification procedures for quality assurance purposes. Some applicants are qualified, but others are not. Thus, the selection process has two dimensions: bidders self-select, and an auctioneer may (dis)qualify some applicants. The paper explores this selection dynamics, using procurement data from road projects in developing countries. It shows that bidders are selecting themselves; low-cost firms are more prone to enter the market. But they are more likely to be rejected for technical reasons. Procurement design, such as contract size, and public governance are also found important determinants of the entry strategy of firms.

Keywords: auction theory, endogenous bidder entry, infrastructure development, public procurement

JEL Classification: H54, D44, C35

Suggested Citation

Estache, Antonio and Iimi, Atsushi, Bidders’ Entry and Auctioneer’s Rejection: Applying a Double Selection Model to Road Procurement Auctions (November 1, 2011). Journal of Applied Economics, Vol XIV, No. 2 (November 2011), 199-223. Available at SSRN: https://ssrn.com/abstract=2063987

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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