Optimal Discounts in Green Public Procurement

Olga Chiappinelli and Gyula Seres

No 1983, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: We consider a Green Public Procurement setting where the procurer provides a bid discount to environment-friendly technologies to foster their use. We assume that, before the auction, firms may switch to green technology via a publicly observable costly investment. We show that investment acts as a signaling device. This mitigates the effect of incomplete information on firms’ costs, thereby triggering more competitive bidding, which results in lower prices for the procurer. Therefore, even a procurer with no preference toward green technology can find it optimal to use a discount. Our results challenge the common perception that Green Public Procurement always implies a trade-off between environmental performance and purchasing price.

Keywords: Public Procurement; Environmental Policy; Auctions (search for similar items in EconPapers)
JEL-codes: D44 H57 Q55 Q58 (search for similar items in EconPapers)
Pages: 22 p.
Date: 2021
New Economics Papers: this item is included in nep-ene, nep-env, nep-gth and nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Optimal discounts in green public procurement (2024)
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