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.
|Udgiver||Copenhagen Business School [wp]|
|Status||Udgivet - 5 feb. 2019|
|Navn||Working Paper / Department of Economics. Copenhagen Business School|
- Excess entry
- Public procurement auctions
- Optimal fee
- Sequential search