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Optimal bidder participation in public procurement auctions

Ilke Onur () and Bedri Tas

International Tax and Public Finance, 2019, vol. 26, issue 3, No 6, 595-617

Abstract: Abstract This paper empirically identifies the optimal number of bidders to achieve the lowest procurement prices in public procurement auctions. We examine a unique data set that covers all Turkish government procurement auctions comprising more than half a million observations for the period 2005–2012. We present a novel and easy-to-implement method to investigate the number of bidders required for the public procurement markets to be competitive. Our results suggest that procurement costs decrease until six to eight bidders. Policy makers can employ the method to investigate the optimal number of bidders and design policies to promote competition. Moreover, policy makers can also make use of the optimal numbers as focal points to inspect whether competitive efficiency is achieved in public procurement auctions.

Keywords: Public procurement auctions; Endogeneity; Competition (search for similar items in EconPapers)
JEL-codes: C31 D44 H57 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s10797-018-9515-2

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