Bidder asymmetry in infrastructure procurement: are there any fringe bidders ?

Antonio Estache and Atsushi Iimi

No 4660, Policy Research Working Paper Series from The World Bank

Abstract: Asymmetric auctions are among the most rapidly growing areas in the auction literature. The potential benefits from improved auction efficiency are expected to be enormous in public procurement auctions related to official development projects. Entrant bidders are considered a key to enhance competition in an auction and break potential collusive arrangements among incumbent bidders. Asymmetric auction theory predicts that weak (fringe) bidders would bid more aggressively when they are faced with a strong (incumbent) opponent. Using official development assistance procurement data, this paper finds that in the major infrastructure sectors, entrants submitted systematically aggressive bids in the presence of an incumbent bidder. The findings also show that a high concentration of incumbents in an auction would harm auction efficiency, raising procurement costs. The results suggest that auctioneers should encourage fringe bidders to actively participate in the bidding process while maintaining the quality of the projects. This is conducive to enhancing competitive circumstances in public procurements and improving allocative efficiency.

Keywords: Investment and Investment Climate; Government Procurement; Debt Markets; E-Business; Infrastructure Economics (search for similar items in EconPapers)
Date: 2008-07-01
New Economics Papers: this item is included in nep-ppm
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders? (2010)
Working Paper: Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders? (2008)
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