Design of Public Procurement Auctions: Evidence from Cleaning Contracts

Otto Toivanen, Ari Hyytinen and Sofia Lundberg

No 11708, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We analyze a regime change from beauty contests to first-price sealed-bid and scoring auctions, using data on public procurement of cleaning services in Swe-dish municipalities. In beauty contests, the lowest bid often lost and municipalities left substantial money on the table. The procurement costs were similar before and after the regime change, for two reasons: i) Entry strongly decreases the procure-ment cost, but did not change. Entry would have decreased with the regime change had the municipalities not adjusted the objects of auctions. ii) Municipali-ties were less price-sensitive and favored inhouse suppliers in the old regime, leading to more aggressive bidding by others. When the scope for favoritism re-duced, these changes balanced each other out. We discuss the implications of our findings for efficiency and welfare

Keywords: Public procurement; Auction design; Entry; Beauty contests; Scoring (search for similar items in EconPapers)
JEL-codes: D44 H57 P16 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-cta
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Related works:
Journal Article: Design of public procurement auctions: evidence from cleaning contracts (2018)
Working Paper: Design of public procurement auctions: Evidence from cleaning contracts (2018)
Working Paper: Design of public procurement auctions: Evidence from cleaning contracts (2015)
Working Paper: Design of public procurement auctions: Evidence from cleaning contracts (2015)
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