The Price Effects of Increased Competition in Auction Markets

Brannman, Lance; Klein, Josephine; Weiss, Leonard W.

doi:10.2307/1937897

Cited by 120 publications

(67 citation statements)

References 7 publications

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“…To that extent, there is no difference between the models; and evidence from three sets of public sector contracts which tests the impact of the degree of competition on winning bid price supports this prediction (McAfee and McMillan, 1988;Gomez-Lobo and Szymanski, 2001;and Milne and Wright, 2004). 1 The functional form, on the other hand, varies with the model; but attempts to differentiate bidders' values this way have been unsuccessful (Brannman et al, 1987;and Gilberto and Varaiya, 1989). For the purposes of this study no particular model is assumed.…”

Section: Classical Contracts and Auction Theorymentioning

confidence: 80%

Competition, Quality and Contract Compliance: Evidence from Compulsory Competitive Tendering in Local Government in Great Britain, 1987–2000*

Milne¹,

Roy²,

Angeles³

2012

Fiscal Studies

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The introduction of competition has frequently been found to cause costs to fall. There has, however, been a question whether this was partly achieved at the cost of quality. Auction theory predicts prices would fall the greater the competition to provide the service. There has been some debate, however, whether the smaller budgets would make contract compliance more difficult. Evidence is found in support of this hypothesis. We also find some evidence that the better recorded performance of the in-house DSOs during this period was due to the information advantage they had from being incumbents.JEL classification: H57, L14, L15, L32 and L33.

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Section: Classical Contracts and Auction Theorymentioning

confidence: 80%

Competition, Quality and Contract Compliance: Evidence from Compulsory Competitive Tendering in Local Government in Great Britain, 1987–2000*

Milne¹,

Roy²,

Angeles³

2012

Fiscal Studies

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“…Auction theory (building on oligopoly theory) predicts that fewer bidders will mean higher prices in procurement auctions (and lower prices in auctions where the bidders are competing to buy an item); and the evidence again supports the predicted relationship (e.g. Brannman et al, 1987;Brannman and Klein, 1992).…”

mentioning

confidence: 83%

Horizontal Merger Antitrust Enforcement: Some Historical Perspectives, Some Current Observations

White

2006

SSRN Journal

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The DOJ-FTC Merger Guidelines were developed for and best deal with horizontal mergers where the theory of harm is "coordinated effects". The Guidelines deal awkwardly, at best, with mergers where the theory of harm is "unilateral effects". The broad body of evidence -from profitability studies, from pricing studies, and from auction studies -indicates that seller concentration matters. But these studies do not provide adequate guidance as to whether current antitrust enforcement is too strict or too lenient with respect to mergers. Research on the consequences of the "close call" mergers that were not challenged might well provide such guidance, as might a "meta analysis" of the extant price-concentration studies. New procedures are needed for inquiry and enforcement where the theory of harm is "unilateral effects", as is a market definition paradigm for monopolization cases. JEL Classification Numbers: K21, L41

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“…Although how the degree of competition would affect the auction outcome will depend on model, this has been confirmed in many empirical auctions (e.g., Brannman et al, 1987;Paarsch, 1992;Gupta, 2002;Estache and Iimi, 2008a). In the independent private value paradigm, by which our traditional ODA projects could be characterized, the winning bid should tend to approach the lowest possible procurement price, as the number of participants in an auction increases.…”

Section: Introductionmentioning

confidence: 94%

Bidders' Entry and Auctioneer's Rejection: Applying a Double Selection Model to Road Procurement Auctions

Estache

Iimi²

2011

Journal of Applied Economics

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Limited competition has been a serious concern in infrastructure procurement. Importantly, however, there are normally a number of potential bidders initially showing interest in proposed projects. This paper focuses on tackling the question why these initially interested bidders fade out. An empirical problem is that no bids of fading-out firms are observable. They could decide not to enter the process at the beginning of the tendering or may be technically disqualified at any point of the selection process. The paper applies the double selection model to procurement data from road development projects in developing countries and examines why competition ends up restricted. It shows that bidders are self-selective and auctioneers also tend to limit participation depending on the size of contracts. Then, limited competition would likely lead to high infrastructure procurement costs.

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The Price Effects of Increased Competition in Auction Markets

Cited by 120 publications

References 7 publications

Competition, Quality and Contract Compliance: Evidence from Compulsory Competitive Tendering in Local Government in Great Britain, 1987–2000*

Competition, Quality and Contract Compliance: Evidence from Compulsory Competitive Tendering in Local Government in Great Britain, 1987–2000*

Horizontal Merger Antitrust Enforcement: Some Historical Perspectives, Some Current Observations

Bidders' Entry and Auctioneer's Rejection: Applying a Double Selection Model to Road Procurement Auctions

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