Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 1013: Regulation and Competition in Public Procurement

Samielle Drake () and Fei Xu ()
Additional contact information
Samielle Drake: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden
Fei Xu: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden

Abstract: We examine, theoretically and empirically, the impacts of regulation on optimal bids and competition in public procurement depending on whom the regulation is imposed on. We show that regulation imposed solely on the winner of a procurement contract increases competition whereas regulation imposed on all potential bidders reduces competition. Both types of regulation raise bids in equilibrium. Furthermore, the expected outcomes of regulation depend on its enforceability as bidders adjust their optimal bids and the delivery of the contracts accordingly. Finally, the model’s theoretical implications are supported by behaviours observed in public procurement of cleaning services in Sweden.

Keywords: Public Procurement; Regulation; Competition; Optimal Bids

JEL-codes: D44; H57; L51

Language: English

46 pages, May 2, 2023

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