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Reputation and Entry

Jeffrey Butler (), Enrica Carbone (), Pierluigi Conzo () and Giancarlo Spagnolo

No 21, SITE Working Paper Series from Stockholm School of Economics, Stockholm Institute of Transition Economics

Abstract: This paper reports results from a laboratory experiment exploring the relationship between reputation and entry in procurement. There is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new (smaller or foreign) firms in public procurement markets. Our results suggest that while some reputational mechanisms indeed reduce the frequency of entry, so that the concern is warranted, appropriately designed reputation mechanisms actually stimulate entry. Since quality increases but not prices, our data also suggest that the introduction of reputation may generate large welfare gains for the buyer.

Keywords: Entry; Feedback mechanisms; Governance; Incomplete contracts; Limited enforcement; Incumbency; Multidimensional competition; Participation; Past performance; Procurement; Quality; Reputation; Vendor rating (search for similar items in EconPapers)
JEL-codes: H57 L14 L15 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2012-11-25
New Economics Papers: this item is included in nep-com and nep-cta
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http://swopec.hhs.se/hasite/papers/hasite0021.pdf (application/pdf)

Related works:
Journal Article: Past performance and entry in procurement: An experimental investigation (2020) Downloads
Working Paper: Reputation and Entry in Procurement (2013) Downloads
Working Paper: Reputation and Entry (2013) Downloads
Working Paper: Reputation and Entry (2012) Downloads
Working Paper: Reputation and Entry (2012) Downloads
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