EconPapers    
Economics at your fingertips  
 

Investment Incentives in Procurement Auctions

Leandro Arozamena () and Estelle Cantillon

Review of Economic Studies, 2004, vol. 71, issue 1, 1-18

Abstract: This paper investigates firms' incentives to invest in cost reduction in the first price sealed bid auction, a format largely used for procurement. Two central features of the model are that we allow firms to be heterogeneous and that investment is observable. We find that firms will tend to underinvest in cost reduction because they anticipate fiercer head-on competition. Using the second price auction as a benchmark, we also find that the first price auction will elicit less investment from market participants and that this is socially inefficient. These results have implications for market design when investment is important. Copyright 2004, Wiley-Blackwell.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (65) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1111/0034-6527.00273 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Investment incentives in procurement auctions (2004) Downloads
Working Paper: Investment Incentives in Procurement Auctions (2001) Downloads
Working Paper: Investment Incentives in Procurement Auctions (2000) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:71:y:2004:i:1:p:1-18

Access Statistics for this article

Review of Economic Studies is currently edited by Andrea Prat, Bruno Biais, Kjetil Storesletten and Enrique Sentana

More articles in Review of Economic Studies from Oxford University Press
Bibliographic data for series maintained by Oxford University Press () and Christopher F. Baum ().

 
Page updated 2021-06-15
Handle: RePEc:oup:restud:v:71:y:2004:i:1:p:1-18