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An Ordered‐Probit Analysis of Price and Performance in Competitively Tendered Contracts
Author(s) -
Domberger Simon,
Li Eric Ah Lik
Publication year - 1995
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.1995.tb00885.x
Subject(s) - procurement , ordered probit , probit model , competition (biology) , probit , quality (philosophy) , service (business) , microeconomics , service quality , business , industrial organization , econometrics , economics , marketing , ecology , philosophy , epistemology , biology
This article adopts an ordered‐probit estimation procedure to investigate the influence of competitive tendering on contract price and performance. Using a two‐equation recursive system the findings of Domberger, Hall and Li (1995) turned out to be robust to the ordered‐probit methodology which confirmed the strong negative effect of competitive tendering on contract price. The evidence also suggested that performance was either enhanced or remained the same in the presence of competition. Overall, the results of this investigation support the view that competitive tendering generates efficiency gains without adverse effects on quality of service .