Efficient design of set-aside auctions for small businesses: an empirical analysis

Andrey Tkachenko, Paola Valbonesi, Elena Shadrina () and Gegam Shagbazian
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Elena Shadrina: National Research University Higher School of Economics, Russian Federation

No 240, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: Government support to small business enterprises (SBEs) through set-aside (SA) public procurement auctions is a common practice. The effect of the SA mechanism is, however, ambiguous. On the one hand, SA auctions can attract more SBEs to compete; on the other hand, SA auctions restrict the entry of—possibly—more cost-efficient large firms. We investigate SA auctions’ effect by exploiting an original Russian database on public procurement e-auctions for granulated sugar (a largely homogeneous good) in the period 2011-2013. To identify the causal effect of SA auctions, we overcome two endogeneity issues: procurers’ choice of SA format and firms’ decision to bid. In an empirical setting where confounding elements are minimized, we found that SA auctions’ effect largely depends on both the reserve price value and the level of competition. We found that there exists an optimal interval for the reserve price where SA auctions record lower procurement prices, as compared to non-SA auctions.

Keywords: affirmative action; preferential treatment; public procurement; set-aside auctions; e-auctions; small businesses enterprises (SBEs); small and medium-sized enterprises (SMEs) (search for similar items in EconPapers)
JEL-codes: D44 H11 H57 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2019-10
New Economics Papers: this item is included in nep-cis, nep-ent, nep-reg and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0240

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