Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 825: Do Combinatorial Procurement Auctions Lower Cost? - An Empirical Analysis of Public Procurement of Multiple Contracts

Anders Lunander () and Sofia Lundberg ()
Additional contact information
Anders Lunander: Swedish Business School, Postal: Department of Economics, Örebro University, SE - 702 82 Örebro, Sweden
Sofia Lundberg: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

Abstract: Combinatorial procurement auctions enable suppliers to pass their potential cost synergies on to the procuring entity and may therefore lead to lower costs and enhance efficiency. However, bidders might find it profitable to inflate their stand-alone bids in order to favour their package bids. Using data from standard and combinatorial procurement auctions, we find that bids on individual contracts in simultaneous standard auctions without the option to submit package bids are significantly lower than the corresponding stand-alone bids in combinatorial auctions. Further, no significant difference in procurer’s cost as explained by auction format is found.

Keywords: Combinatorial procurement auctions; Contract bidding

JEL-codes: D44; H57

22 pages, April 20, 2011

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