Fostering Participation in Competitive Procurement

HANDBOOK OF PROCUREMENT, Nicola Dimitri, Gustavo Piga, Giancarlo Spagnolo, eds., Cambridge University Press, 2006

25 Pages Posted: 21 Apr 2006

See all articles by Gian-Luigi Albano

Gian-Luigi Albano

University College London, Italian Procurement Agency (Consip S.p.A.)

Nicola Dimitri

University of Siena - Department of Economics

Isabelle Perrigne

University of Southern California

Gustavo Piga

University of Rome

Abstract

A seminal result in the theory of competitive bidding holds that the buyer can lower the expected awarding price of a procurement contract by setting a reserve price below her opportunity cost for realizing the project. In this paper, we first provide a non-technical explanation for this result, then review how the "optimal reserve price" varies with the degree of interdependence among suppliers' production costs and the risk of collusion in the procurement market.

The paper also discusses how the buyer can foster the participation of new entrants or Small and Medium Enterprises in the procurement market.

Keywords: procurement, reserve price, participation

JEL Classification: H57, D44, D81, L41

Suggested Citation

Albano, Gian-Luigi and Dimitri, Nicola and Perrigne, Isabelle M. and Piga, Gustavo, Fostering Participation in Competitive Procurement. HANDBOOK OF PROCUREMENT, Nicola Dimitri, Gustavo Piga, Giancarlo Spagnolo, eds., Cambridge University Press, 2006. Available at SSRN: https://ssrn.com/abstract=896739

Gian-Luigi Albano (Contact Author)

University College London, Italian Procurement Agency (Consip S.p.A.) ( email )

Gower Street
London
United Kingdom
+39 06 8544 9627 (Phone)

Nicola Dimitri

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy

Isabelle M. Perrigne

University of Southern California ( email )

Room KAP 324E
Los Angeles, CA 90089
United States
213-740-3528 (Phone)
213-740-8543 (Fax)

Gustavo Piga

University of Rome ( email )

Via di Tor Vergata
Rome, Lazio
Italy

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