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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.


Kernel density estimate of bids and predicted bids. Notes: horizontal scale in million 2006 Euros. Black line represents actual bids, grey predictions. Largest 3.92% truncated.
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f0020: Kernel density estimate of bids and predicted bids. Notes: horizontal scale in million 2006 Euros. Black line represents actual bids, grey predictions. Largest 3.92% truncated.

Mentions: Fig. 4 compares the kernel densities of actual to predicted bids. The prediction matches the actual density closely. To assess our two main effects more closely, we show the effect of the backlog and the number of firms on bids in Fig. 5. For the illustration we chose the median project. The ranges of backlog and the number of bidders are chosen such that 99% of all bids are covered. Both variables have the expected sign in the estimation of the scale parameter. In general, the shape parameter also influences the expected value and the total effect of a variable in the Weibull distribution is not obvious from the estimates. For our results, the partial effect of backlog or number of bidders turns out as hypothesized, too: more bidders in the auction decrease the bid, a higher backlog increases the bid.


Competition in the economic crisis: Analysis of procurement auctions.

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

Kernel density estimate of bids and predicted bids. Notes: horizontal scale in million 2006 Euros. Black line represents actual bids, grey predictions. Largest 3.92% truncated.
© Copyright Policy - CC BY
Related In: Results  -  Collection

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

f0020: Kernel density estimate of bids and predicted bids. Notes: horizontal scale in million 2006 Euros. Black line represents actual bids, grey predictions. Largest 3.92% truncated.
Mentions: Fig. 4 compares the kernel densities of actual to predicted bids. The prediction matches the actual density closely. To assess our two main effects more closely, we show the effect of the backlog and the number of firms on bids in Fig. 5. For the illustration we chose the median project. The ranges of backlog and the number of bidders are chosen such that 99% of all bids are covered. Both variables have the expected sign in the estimation of the scale parameter. In general, the shape parameter also influences the expected value and the total effect of a variable in the Weibull distribution is not obvious from the estimates. For our results, the partial effect of backlog or number of bidders turns out as hypothesized, too: more bidders in the auction decrease the bid, a higher backlog increases the bid.

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.