Favoritism in public procurement auctions: model of endogenous entry

Maria Ostrovnaya and Elena Podkolzina

No 00015/2015, Working papers of the Department of Economics - University of Perugia (IT) from Università di Perugia, Dipartimento Economia

Abstract: Governments of different countries try to lower the entry cost in public procurement in order to decrease public spending. The purpose of this paper is to examine how the entry cost influences favoritism and procurement prices in the corrupt environment. We adapt the model of selective entry and find that lower entry cost always reduces the contract price paid by the benevolent procurer, but at the same time may make favoritism more stable. Thus the entry cost does not affect the contract price paid by the corrupt procurer or increase it. We illustrate this result using case study on gasoline procurement in Russia where the entry cost of companies was decreased by e-procurement reform. This allows us to examine how changes in entry costs influence competition of companies and procurement prices in auctions.

Keywords: public procurement; endogenous entry; favoritism; e-auctions (search for similar items in EconPapers)
JEL-codes: D73 H57 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2015-11-02
New Economics Papers: this item is included in nep-cis and nep-com
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.econ.unipg.it/files/generale/wp_2015/WP ... vnaya_Podkolzina.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pia:papers:00015/2015

Access Statistics for this paper

More papers in Working papers of the Department of Economics - University of Perugia (IT) from Università di Perugia, Dipartimento Economia Contact information at EDIRC.
Bibliographic data for series maintained by Ubaldo Pizzoli ().