Foreign Bidders Going Once, Going Twice... Protection in Government Procurement Auctions
Matthew Cole () and
Ronald Davies ()
No 1402, Working Papers from Florida International University, Department of Economics
Until recently, government procurement bidding processes have generally favored domestic ﬁrms by awarding the contract to a domestic ﬁrm even if a foreign ﬁrm tenders a lower bid, so long as the difference between the two is sufficiently small. This has been replaced by an agreement abolishing this practice. However, the presence of other trade barriers, such as tariffs, can continue to disadvantage foreign ﬁrms. We analyze the bidding strategies in such a game and show that when domestic proﬁts are valued,tariffs will be used to discriminate against foreign ﬁrms. Furthermore, we ﬁnd that optimal tariffs can be more protectionist than the optimal price preference, resulting in lower expected domestic welfare and total surplus.
Keywords: Government Procurement; Tariffs; Price Preference (search for similar items in EconPapers)
JEL-codes: F12 F13 H57 (search for similar items in EconPapers)
Pages: 31 pages
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Working Paper: Foreign Bidders Going Once, Going Twice... Protection in Government Procurement Auctions (2014)
Working Paper: Foreign bidders going once, going twice... Protection in government procurement auctions (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fiu:wpaper:1402
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