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Protection in Government Procurement Auctions

Matthew Cole (), Ronald Davies () and Todd Kaplan ()

No 1601, Working Papers from California Polytechnic State University, Department of Economics

Abstract: Discrimination against foreign bidders in procurement auctions has typically been achieved by price preferences, that is, a policy of accepting a range of higher prices from a domestic firm over a lower price from a foreign firm. We demonstrate that in the bidding game, each level of protection via a price preference can be achieved by an equivalent tariff. When government welfare depends only on net expenditures, this equivalence carries over to the government's decision. As such, agreements to eliminate price preferences may be unsuccessful unless accompanied by tariff limitations. On the other hand, if tariff collection is costly, then even without tariff limits banning price preferences lowers protection and increases global welfare.

Keywords: Government Procurement; Tariffs; Price Preference (search for similar items in EconPapers)
JEL-codes: F12 F13 H57 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2016
New Economics Papers: this item is included in nep-com, nep-pke and nep-reg
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Journal Article: Protection in government procurement auctions (2017) Downloads
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