Wild bids. Gambling for resurrection in procurement contracts

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Journal of Regulatory Economics, Volume 26, Number 1, July, 2004, pp. 41-68
http://hdl.handle.net/10230/819
To cite or link this document: http://hdl.handle.net/10230/819
dc.contributor.author Calveras, Aleix
dc.contributor.author Ganuza, Juan J.
dc.contributor.author Hauk, Esther
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.issued 2001-03-01
dc.identifier.citation Journal of Regulatory Economics, Volume 26, Number 1, July, 2004, pp. 41-68
dc.identifier.uri http://hdl.handle.net/10230/819
dc.description.abstract This paper analyzes the problem of abnormally low tenders in the procurement process. Limited liability causes firms in a bad financial situation to bid more aggressively than good firms in the procurement auction. Therefore, it is more likely that the winning firm is a firm in financial difficulties with a high risk of bankruptcy. The paper analyzes the different regulatory practices to face this problem with a special emphasis on surety bonds used e.g. in the US. We characterize the optimal surety bond and show that it does not coincide with the current US regulation. In particular we show that under a natural assumption the US regulation is too expensive and provides overinsurance to the problem of abnormally low tenders.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 553
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Wild bids. Gambling for resurrection in procurement contracts
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2014-06-03T07:14:05Z
dc.subject.keyword Microeconomics
dc.subject.keyword procurement
dc.subject.keyword bankruptcy
dc.subject.keyword abnormally low tenders
dc.subject.keyword regulation
dc.rights.accessRights info:eu-repo/semantics/openAccess


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