DP11286 The Effect of Discretion on Procurement Performance
|Author(s):||Decio Coviello, Andrea Guglielmo, Giancarlo Spagnolo|
|Publication Date:||May 2016|
|Keyword(s):||Procurement, Regression Discontinuity, Regulatory Discretion, Restricted Auctions|
|JEL(s):||C31, D02, D44, L11|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=11286|
We run a regression discontinuity design analysis to document the causal effect of increasing buyers' discretion on procurement outcomes in a large database for public works in Italy. Works with a value above a given threshold have to be awarded through an open auction. Works below this threshold can be more easily awarded through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid. Our main result is that discretion increases the probability that the same firm wins repeatedly, and it does not deteriorate (and may improve) the procurement outcomes we observe. The effects of discretion persist when we repeat the analysis controlling for the geographical location, corruption, social capital and judicial efficiency in the region of the public buyers running the auctions.