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Incentives For Repeated Contracts In Public Sector: Empirical Study Of Gasoline Procurement In Russia

Andrei Yakovlev (), Oleg Vyglovsky (), Olga Demidova and Aleksander Bashlyk
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Andrei Yakovlev: National Research University Higher School of Economics
Oleg Vyglovsky: National Research University Higher School of Economics

No WP BRP 24/PA/2015, HSE Working papers from National Research University Higher School of Economics

Abstract: This paper analyzes the phenomenon of repeated procurements made by public sector customers from the same supplier. The previous surveys of “relational contracts” gave different explanations for the possible implications of such repeated procurements, but those surveys dealt mostly with goods and services, with quality difficult to verify at the point of delivery. This work studies the impact of repeated procurements on the price of a simple homogeneous product. We presume that the downward price shift of such a product during repeated procurements can be the consequence of transaction costs reduction in the framework of the bona fide behavior of a customer and supplier. An upward shift in the prices as compared to the market average can, on the contrary, be interpreted as an indirect indication of corrupt collusion between them. Using a huge dataset on procurements of AI-92 gasoline in Russia in 2011, we show that the price difference between repeated and one-time contracts can be explained by the type of procurement procedures providing different opportunities for corrupt behavior. Less transparent procedures (single-sourcing and requests for quotations) are more suitable for corrupt collusion. This might explain why the prices of repeat contracts in this case were higher. On the contrary, the prices of repeat contracts were lower compared to one-time procurement in the case of more transparent e-auctions.

Keywords: public procurement; repeated contracts; relational contracting; corruption; e-auction (search for similar items in EconPapers)
JEL-codes: H57 L14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cis, nep-com, nep-reg and nep-tra
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
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Published in WP BRP Series: Public Administration / PA, January 2015, pages 1-20

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Persistent link: https://EconPapers.repec.org/RePEc:hig:wpaper:24/pa/2015

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