Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 1-2019: Bid Costs and the (In)efficiency of Public Procurement Auctions

Niels Blomgren-Hansen ()
Additional contact information
Niels Blomgren-Hansen: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark

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.

Keywords: Excess entry; Public procurement auctions; Optimal fee; Sequential search

JEL-codes: D21; D43; D44; L13; L51

23 pages, February 5, 2019

Full text files

9710 PDF-file Full text

Download statistics

Questions (including download problems) about the papers in this series should be directed to CBS Library Research Registration Team ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:10:58.