Bid Costs and the (In)efficiency of Public Procurement Auctions

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Bid Costs and the (In)efficiency of Public Procurement Auctions

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Title: Bid Costs and the (In)efficiency of Public Procurement Auctions
Author: Blomgren-Hansen, Niels
Abstract: The paper analyzes the excess entry hypothesis for sealed-bid first-price public procurement auctions. The hypothesis is proved analytically for any feasible combination of bid preparation cost and bid evaluation cost when the bidders face a rectangular cost density function and confirmed in numerical simulations based on a family of flexible cost density functions. The excess entry hypothesis implies that the procurer may reduce both his own cost and the social cost by imposing a positive fee on the bids. Sequential search is a superior strategy to a public procurement auction whether or not the procurer imposes an optimal fee on the bids.
URI: http://hdl.handle.net/10398/9710
Date: 2019-03-06

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