An Empirical Analysis of Entrant and Incumbent Bidding in Road Construction Auctions

22 Pages Posted: 13 Oct 2003

See all articles by Dakshina G. De Silva

Dakshina G. De Silva

Department of Economics, Lancaster University Management School

Timothy Dunne

Federal Reserve Bank of Cleveland

Georgia Kosmopoulou

University of Oklahoma - Department of Economics

Abstract

This paper explores differences in the bidding patterns of entrants and incumbents in road construction auctions. We find that entrants bid more aggressively and win auctions with significantly lower bids than incumbents. The differences in their bidding patterns are consistent with a model of auctions in which the distribution of an entrant's costs exhibits greater dispersion than that of an incumbent's and relations of stochastic dominance in the distributions do not persist for the entire range of estimated costs. We also find that more efficient firms bid, on average, more aggressively and firms with greater backlogs bid less aggressively.

Suggested Citation

De Silva, Dakshina G. and Dunne, Timothy and Kosmopoulou, Georgia, An Empirical Analysis of Entrant and Incumbent Bidding in Road Construction Auctions. Journal of Industrial Economics, Vol. 51, pp. 295-316, September 2003. Available at SSRN: https://ssrn.com/abstract=444350

Dakshina G. De Silva (Contact Author)

Department of Economics, Lancaster University Management School ( email )

Lancaster LA1 4YX
United Kingdom

Timothy Dunne

Federal Reserve Bank of Cleveland ( email )

PO Box 6387
Cleveland, OH 44101-1387
United States

Georgia Kosmopoulou

University of Oklahoma - Department of Economics ( email )

633 Elm Avenue
306 Ellison Hall
Norman, OK 73019
United States
405-325-3083 (Phone)
405-325-5842 (Fax)

HOME PAGE: http://georgiakosmopoulou.oucreate.com/

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