Year: 2003
Type: report
Abstract: Should the buyer of a customized good use competitive bidding or negotiation to select a contractor?To shed light on this question, we offer a framework that compares auctions with negotiations.We then examine a comprehensive data set of private sector building contracts awarded in Northern California during the years 1995-2000.The analysis suggests a number of potential limitations to the use of auctions.Auctions perform poorly when projects are complex, contractual design is incomplete and there are few available bidders.Furthermore, auctions stifle communication between buyers and the sellers, preventing the buyer from utilizing the contractor's expertise when designing the project.Some implications of these results for procurement in the public sector are discussed.
DOI: 10.3386/w9757
Authors: Patrick Bajari, Robert McMillan, Steve Tadelis
Institutions: National Bureau of Economic Research, Stanford University
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3122504891