On the Competitive Effects of Screening in Procurement

TILEC Discussion Paper No. 2019-009

CentER Discussion Paper No. 2019-019

45 Pages Posted: 29 May 2019

See all articles by Adam Pigon

Adam Pigon

Institute for Structural Research (IBS)

Gyula Seres

Humboldt University of Berlin; Tilburg Law and Economics Center (TILEC)

Date Written: May 14, 2019

Abstract

Procuring authorities frequently use screening in order to mitigate risky bids. This study estimates the effect of bid screening and litigation on entry and bidding using a unique data set on highway construction procurement auctions in Poland. The market exhibits a screening method that ex post selects eligible offers. We demonstrate with an empirical model that this method disproportionately affects small firms and creates a barrier to entry. Our results suggest that screening increases bids by two channels. First, it directly inflates bids as well as decreasing entry. Second, in a competitive market, lower entry also inflates bids and prices.

Keywords: Procurement, Auctions, Market Design, Litigation

JEL Classification: H57, D44, D47, L5

Suggested Citation

Pigon, Adam and Seres, Gyula, On the Competitive Effects of Screening in Procurement (May 14, 2019). TILEC Discussion Paper No. 2019-009, CentER Discussion Paper No. 2019-019, Available at SSRN: https://ssrn.com/abstract=3392328 or http://dx.doi.org/10.2139/ssrn.3392328

Adam Pigon (Contact Author)

Institute for Structural Research (IBS) ( email )

Wiśniowa 40B/8, 02-520
Warsaw
Poland

Gyula Seres

Humboldt University of Berlin ( email )

Unter den Linden 6
Berlin, AK Berlin 10099
Germany

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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