Auctions vs. Bargaining: An Empirical Analysis of Medical Device Procurement
18 Pages Posted: 26 Jun 2000
Date Written: January 19, 2000
Abstract
We test recent theory on the benefits of auctions and bargaining as alternative procurement mechanisms using data on the procurement of medical devices by Italian hospitals. Theory suggests that auctions perform well when cost control is the key concern, but are less effective at producing the optimal mix of quality and price for complex products where quality is difficult to verify. Consistent with the theory, we find that auctions are used more often when the influence of financial staff relative to medical staff is high, when the marginal cost of increasing product quality is high, and when the marginal value of increasing quality is low.
JEL Classification: D44, I11, L14, L31
Suggested Citation: Suggested Citation
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