Winning by Default: Why is There So Little Competition in Government Procurement?

Supplementary Appendix to “winning by Default: Why Is There so Little Competition in Government Procurement?”

Competition in the economic crisis: Analysis of procurement auctions

We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions. Using data from Austrian construction procurements, we estimate bidders׳ construction costs within a private value auction model. We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 perce...

Limited liability and mechanism design in procurement

In the presence of cost uncertainty, limited liability introduces the possibility of default in procurement with its associated bankruptcy costs. When …nancial soundness is not perfectly observable, we show that incentive compatibility implies that …nancially less sound contractors are selected with higher probability in any feasible mechanism. Informational rents are associated with unsound …n...

Cumulation and antidumping: A challenge to competition

~ S national economies have become increasingly inter-related, national governments have broadened their efforts to coordinate trade-related policies. For years GATT negotiators concentrated on tariff reduction and trade liberalisation. The recently completed Uruguay Round negotiations included a number of agreements in previously uncharted waters (e.g., agreements on government procurement, tr...

The significance of government-procurement policies as nontariff barriers to trade was recognized by the General Agreement on Tariffs and Trade (GATT), whose Agreement on Government Procurement came into effect in 1981. This sets out rules on how government

We model the bidding for a government contract in which there is imperfect competition; each bidder is better informed about his own costs than either his rival bidders or the government; and the distribution of the domestic firms’ costs differs from the distribution of foreign firms’ costs because of comparative-advantage effects. We find that the gcyemment minimizes its expected procurement c...