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Resident Bid Preference, Affiliation, and Procurement Competition: Evidence from New Mexico
Author(s) -
Rosa Benjamin V.
Publication year - 2019
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12202
Subject(s) - bidding , procurement , common value auction , competition (biology) , preference , business , discounting , unique bid auction , empirical evidence , microeconomics , marketing , economics , auction theory , finance , ecology , biology , philosophy , epistemology
In public procurement auctions, governments routinely offer preferences to qualified firms in the form of bid discounts. Previous studies on bid discounting do not account for affiliation – a form of cost dependence between bidders that is likely to occur in a public procurement environment. Utilizing data from the New Mexico Department of Transportation’s Resident Preference Program, I develop and estimate an empirical model of firm bidding and entry that allows for affiliation in firms’ project costs. I find evidence of affiliation and show how it changes preference auction outcomes.