The Effect of Information on the Bidding and Survival of Entrants in Procurement Auctions

Dakshina De Silva, Georgia Kosmopoulou and Carlos Lamarche

MPRA Paper from University Library of Munich, Germany

Abstract: In government procurement auctions of construction contracts, entrants are typically less informed and bid more aggressively than incumbent firms. This bidding behavior makes them more susceptible to losses a¤ecting their prospect of survival. In April of 2000, the Oklahoma Department of Transportation started releasing the internal cost estimates to complete highway construction projects. Using newly developed quantile regression approaches, this paper examines the impact of the policy change on aggressive entrants. First, we find that the information release eliminates the bidding differential between entrants and incumbents attributed to informational asymmetries. Second, we argue that the policy change a¤ects the prospects of survival of entrants in the market. We find that those who used to exit the market relatively soon are now staying 37 percent longer, while at the median level bidding duration increased by roughly 68 percent. The policy has the potential to encourage entry in government procurement auctions and thus increase competition.

Keywords: Entry; Survival; Information Release; Procurement Auctions (search for similar items in EconPapers)
JEL-codes: D44 H57 (search for similar items in EconPapers)
Date: 2007-06-08
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: The effect of information on the bidding and survival of entrants in procurement auctions (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:5236

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