Auctions with Endogenous Participation and Quality Thresholds: Evidence from ODA Infrastructure Procurement

Antonio Estache and Atsushi Iimi

No 2009_006, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: Infrastructure projects are often technically complicated and highly customized. Therefore, procurement competition tends to be limited. Competition is the single most important factor toward auction efficiency and anti-corruption. However, the degree of competition realized is closely related to bidders’ entry decision and auctioneer’s decision on how to assess technical attributes in the bid evaluation process. The paper estimates the interactive effects among quality, entry and competition. With data on procurement auctions for electricity projects in developing countries, it is found that large electricity works are by nature costly and can attract only a few participants. The limited competition would raise government procurement costs. In addition, high technical requirements are likely to be imposed for these large-scale projects, which will in turn add extra costs for the better quality of works and limit bidder participation furthermore. The evidence suggests that the quality is of particular importance in large infrastructure projects and auctioneers cannot easily substitute prices for quality.

Keywords: Public procurement; auction theory; infrastructure development; governance (search for similar items in EconPapers)
JEL-codes: C21 D44 H54 H57 (search for similar items in EconPapers)
Pages: 30 p.
Date: 2009
New Economics Papers: this item is included in nep-ppm
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Citations: View citations in EconPapers (4)

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Working Paper: Auctions with endogenous participation and quality thresholds: evidence from ODA infrastructure procurement (2009)
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