Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders?

Antonio Estache and Atsushi Iimi

No 2008_020, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: Asymmetric auctions are among the most rapidly growing areas in the auction literature. The potential benefits from improved auction efficiency are expected to be enormous in public procurement auctions related to official development projects. Entrant bidders are considered a key to enhance competition in an auction and break potential collusive arrangements among incumbent bidders. Asymmetric auction theory predicts that weak (fringe) bidders would bid more aggressively when they are faced with a strong (incumbent) opponent. With ODA procurement data, it has been found that in the major infrastructure sectors, entrants submitted systematically aggressive bids in the presence of an incumbent bidder. It is also shown that high concentration of incumbents in an auction would harm auction efficiency, raising procurement costs. The results suggest that auctioneers should encourage fringe bidders to actively participate in the bidding process while maintaining the quality of the projects. It is conducive to enhancing competitive circumstances in public procurements and improving allocative efficiency.

Keywords: Public procurement; auction theory; infrastructure development; bidder asymmetry; fringe bidders; market entry (search for similar items in EconPapers)
Pages: 23 p.
Date: 2008-03
New Economics Papers: this item is included in nep-com and nep-ppm
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Citations: View citations in EconPapers (3)

Published by: ECARES, Université Libre de Bruxelles, Bruxelles

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Related works:
Journal Article: Bidder Asymmetry in Infrastructure Procurement: Are There any Fringe Bidders? (2010)
Working Paper: Bidder asymmetry in infrastructure procurement: are there any fringe bidders ? (2008)
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