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Competition in the economic crisis: Analysis of procurement auctions.

Gugler K, Weichselbaumer M, Zulehner C - Eur Econ Rev (2015)

Bottom Line: We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions.We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 percentage points.We also find that without the government stimulus package this decrease would have been larger.

View Article: PubMed Central - PubMed

Affiliation: Vienna University of Economics and Business, Welthandelsplatz 1, A-1020 Vienna, Austria.

ABSTRACT

We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions. Using data from Austrian construction procurements, we estimate bidders׳ construction costs within a private value auction model. We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 percentage points. We also find that without the government stimulus package this decrease would have been larger. These two pieces of evidence point to pro-cyclical markups.

No MeSH data available.


Stock of contracts and new orders in construction indicate when crisis started. Notes: shaded area potential start of the crisis derived from stock/new orders. Values in million 2005 Euros. Source: Statistik Austria, Wifo database.
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f0010: Stock of contracts and new orders in construction indicate when crisis started. Notes: shaded area potential start of the crisis derived from stock/new orders. Values in million 2005 Euros. Source: Statistik Austria, Wifo database.

Mentions: Fig. 2 puts developments in the construction sector in a longer time perspective. Total construction (private and public contracts) displays an upward trend both in the stock of contracts and new orders — new orders are the gross inflow of new contracts that are accepted by firms in a given month — up to about 2007. Stocks of contracts reach a plateau a few months earlier than new orders. Not before September 2009 do the stock values fall short of the level seen in January 2008. Subtracting eleven months leads to the first possible impact of the trailing moving average. October 2008 then is a potential date when we could expect changes in the bidding behavior of firms if stock values of contracts are relevant for the bidders. New orders provide early information on the output of the construction sector in the months that follow. Construction firms can anticipate their backlog in the near future and may adjust bidding behavior. A relatively consistent downward movement of new orders starts in March 2009, which, after subtracting eleven months, gives April 2008 as a second relevant date.


Competition in the economic crisis: Analysis of procurement auctions.

Gugler K, Weichselbaumer M, Zulehner C - Eur Econ Rev (2015)

Stock of contracts and new orders in construction indicate when crisis started. Notes: shaded area potential start of the crisis derived from stock/new orders. Values in million 2005 Euros. Source: Statistik Austria, Wifo database.
© Copyright Policy - CC BY
Related In: Results  -  Collection

License
Show All Figures
getmorefigures.php?uid=PMC4318169&req=5

f0010: Stock of contracts and new orders in construction indicate when crisis started. Notes: shaded area potential start of the crisis derived from stock/new orders. Values in million 2005 Euros. Source: Statistik Austria, Wifo database.
Mentions: Fig. 2 puts developments in the construction sector in a longer time perspective. Total construction (private and public contracts) displays an upward trend both in the stock of contracts and new orders — new orders are the gross inflow of new contracts that are accepted by firms in a given month — up to about 2007. Stocks of contracts reach a plateau a few months earlier than new orders. Not before September 2009 do the stock values fall short of the level seen in January 2008. Subtracting eleven months leads to the first possible impact of the trailing moving average. October 2008 then is a potential date when we could expect changes in the bidding behavior of firms if stock values of contracts are relevant for the bidders. New orders provide early information on the output of the construction sector in the months that follow. Construction firms can anticipate their backlog in the near future and may adjust bidding behavior. A relatively consistent downward movement of new orders starts in March 2009, which, after subtracting eleven months, gives April 2008 as a second relevant date.

Bottom Line: We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions.We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 percentage points.We also find that without the government stimulus package this decrease would have been larger.

View Article: PubMed Central - PubMed

Affiliation: Vienna University of Economics and Business, Welthandelsplatz 1, A-1020 Vienna, Austria.

ABSTRACT

We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions. Using data from Austrian construction procurements, we estimate bidders׳ construction costs within a private value auction model. We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 percentage points. We also find that without the government stimulus package this decrease would have been larger. These two pieces of evidence point to pro-cyclical markups.

No MeSH data available.