DP11286 The Effect of Discretion on Procurement Performance
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.
