Auctions Versus Negotiations in Procurement: An Empirical Analysis
نویسندگان
چکیده
Should the buyer of a customized good use competitive bidding or negotiation to select a contractor? To shed light on this question, we consider several possible determinants that may influence the choice of auctions versus negotiations. We then examine a comprehensive data set of private sector building contracts awarded in Northern California during the years 1995–2000. The analysis suggestsanumberofpossible limitations to theuseofauctions.Auctionsmayperform poorlywhenprojectsarecomplex,contractualdesign is incomplete,andthereare few available bidders. Furthermore, auctionsmay stifle communication between buyers and sellers, preventing the buyer from utilizing the contractor’s expertise whendesigning theproject. Some implicationsof these results for procurement in the public sector are discussed (JEL D23, D82, H57, L14, L22, L74).
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