Work

Paying over the odds at the end of the fiscal year. Evidence from Ukraine

Year: 2024

Type: article

Abstract: Governments are the largest buyers in most countries. They tend to operate annually expiring budgets and spend disproportionately large amounts at year-end. This paper is the first to investigate whether supplier firms increase prices at year-end to benefit from this behaviour. We develop a novel method using neural networks to estimate firms margins from the bidding behaviour of other firms in procurement auctions. We use a dataset of Ukrainian government procurement between 2017 and 2021 to document significantly higher prices and supplier profit margins at year-end. We demonstrate how results change depending on the type of good, the length of the buyer–supplier relationship, and the impact of Covid-19. Finally, we provide policy suggestions on how funds could be saved.

Source: Journal of Econometrics

DOI: 10.1016/j.jeconom.2024.105903

Authors: Margaryta Klymak, Stuart Baumann

Institution: King's College London

Language: English

Topic: Auction Theory and Applications

Subfield: Management Science and Operations Research

Field: Decision Sciences

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,850