On the Competitive Effects of Screening in Procurement

G. Seres, Adam Pigon*

*Corresponding author for this work

Research output: Working paperDiscussion paperOther research output

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Abstract

Procuring authorities frequently use screening in order to mitigate risky bids. This study estimates the effect of bid screening and litigation on entry and bidding using a unique data set on highway construction procurement auctions in Poland. The market exhibits a screening method that ex post selects eligible offers. We demonstrate with an empirical model that this method disproportionately affects small firms and creates a barrier to entry. Our results suggest that screening increases bids by two channels. First, it directly inflates bids as well as decreasing entry. Second, in a competitive market, lower entry also inflates bids and prices.
Original languageEnglish
Place of PublicationTilburg
PublisherTILEC
Number of pages45
Volume2019-009
Publication statusPublished - 14 May 2019

Publication series

NameTILEC Discussion Paper
Volume2019-009

Fingerprint

Screening
Procurement
Bid
Competitive effect
Poland
Highway construction
Authority
Litigation
Bidding
Barriers to entry
Small firms
Procurement auctions
Empirical model
Competitive market

Keywords

  • procurement
  • auctions
  • market design
  • litigation

Cite this

Seres, G., & Pigon, A. (2019). On the Competitive Effects of Screening in Procurement. (TILEC Discussion Paper; Vol. 2019-009). Tilburg: TILEC.
Seres, G. ; Pigon, Adam. / On the Competitive Effects of Screening in Procurement. Tilburg : TILEC, 2019. (TILEC Discussion Paper).
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Seres, G & Pigon, A 2019 'On the Competitive Effects of Screening in Procurement' TILEC Discussion Paper, vol. 2019-009, TILEC, Tilburg.

On the Competitive Effects of Screening in Procurement. / Seres, G.; Pigon, Adam.

Tilburg : TILEC, 2019. (TILEC Discussion Paper; Vol. 2019-009).

Research output: Working paperDiscussion paperOther research output

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N2 - Procuring authorities frequently use screening in order to mitigate risky bids. This study estimates the effect of bid screening and litigation on entry and bidding using a unique data set on highway construction procurement auctions in Poland. The market exhibits a screening method that ex post selects eligible offers. We demonstrate with an empirical model that this method disproportionately affects small firms and creates a barrier to entry. Our results suggest that screening increases bids by two channels. First, it directly inflates bids as well as decreasing entry. Second, in a competitive market, lower entry also inflates bids and prices.

AB - Procuring authorities frequently use screening in order to mitigate risky bids. This study estimates the effect of bid screening and litigation on entry and bidding using a unique data set on highway construction procurement auctions in Poland. The market exhibits a screening method that ex post selects eligible offers. We demonstrate with an empirical model that this method disproportionately affects small firms and creates a barrier to entry. Our results suggest that screening increases bids by two channels. First, it directly inflates bids as well as decreasing entry. Second, in a competitive market, lower entry also inflates bids and prices.

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KW - auctions

KW - market design

KW - litigation

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Seres G, Pigon A. On the Competitive Effects of Screening in Procurement. Tilburg: TILEC. 2019 May 14. (TILEC Discussion Paper).