The Effect of Discretion on Procurement Performance

Decio Coviello (), Andrea Guglielmo () and Giancarlo Spagnolo ()
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Decio Coviello: HEC Montréal, Montréal, Québec H3T 2A7, Canada
Andrea Guglielmo: Analysis Group, Inc., Boston, Massachusetts 02199
Giancarlo Spagnolo: Stockholm Institute of Transition Economics, Stockholm School of Economics, 113 83 Stockholm, Sweden; Einaudi Institute for Economics and Finance, 00187 Roma, Italy; University di Roma Tor Vergata, 00133 Roma, Italy

Management Science, 2018, vol. 64, issue 2, 715-738

Abstract: We run a regression discontinuity design analysis to document the causal effect of increasing buyers’ discretion on procurement outcomes in a large database for public works in Italy. Works with a value above a given threshold have to be awarded through an open auction. Works below this threshold can be more easily awarded through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid. Our main result is that discretion increases the probability that the same firm wins repeatedly, and it does not deteriorate (and may improve) the procurement outcomes we observe. The effects of discretion persist when we repeat the analysis controlling for the geographical location, corruption, social capital, and judicial efficiency in the region of the public buyers running the auctions. Data and the online appendix are available at https://doi.org/10.1287/mnsc.2016.2628 . This paper was accepted by John List, behavioral economics.

Keywords: procurement; restricted auctions; regression discontinuity; regulatory discretion (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (58)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:64:y:2018:i:2:p:715-738

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