Work

Awarding Price, Contract Performance, and Bids Screening: Evidence from Procurement Auctions

Year: 2013

Type: article

Abstract: This paper presents evidence on the perverse trade-off that first price auctions induce between low prices at the awarding stage and poor ex post performance when bids are not binding commitments. By exploiting the different timing with which first price auctions were introduced in Italy to procure public works, this study finds that at least half of the cost savings from lower winning prices are lost because of ex post renegotiation. Screening the lowest price bid for its responsiveness prevents performance worsening but also reduces the initial cost savings by a third and induces delays in awarding the contract. (JEL D44, H54, H57, R42)

Source: American Economic Journal Applied Economics

DOI: 10.1257/app.6.1.108

Author: Francesco Decarolis

Institution: Boston University

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W2117873694

FWCI: 13.21

Cites: 33

Cited by: 176

Related to: 10