Bidder Asymmetry in Infrastructure Procurement : Are There Any Fringe Bidders?
Asymmetric auctions are among the most rapidly growing areas in the auction literature. The potential benefits from improved auction efficiency are expected to be enormous in public procurement auctions related to official development projects. Ent...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2008/07/9644750/bidder-asymmetry-infrastructure-procurement-fringe-bidders http://hdl.handle.net/10986/6857 |
| Summary: | Asymmetric auctions are among the most
rapidly growing areas in the auction literature. The
potential benefits from improved auction efficiency are
expected to be enormous in public procurement auctions
related to official development projects. Entrant bidders
are considered a key to enhance competition in an auction
and break potential collusive arrangements among incumbent
bidders. Asymmetric auction theory predicts that weak
(fringe) bidders would bid more aggressively when they are
faced with a strong (incumbent) opponent. Using official
development assistance procurement data, this paper finds
that in the major infrastructure sectors, entrants submitted
systematically aggressive bids in the presence of an
incumbent bidder. The findings also show that a high
concentration of incumbents in an auction would harm auction
efficiency, raising procurement costs. The results suggest
that auctioneers should encourage fringe bidders to actively
participate in the bidding process while maintaining the
quality of the projects. This is conducive to enhancing
competitive circumstances in public procurements and
improving allocative efficiency. |
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