Competition in the economic crisis: Analysis of procurement auctions |
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| Institution: | 1. Vienna University of Economics and Business, Welthandelsplatz 1, A-1020 Vienna, Austria;2. Goethe University Frankfurt, Faculty of Economics and Business Administration, Grüneburgplatz 1, 60323 Frankfurt am Main, Germany;3. Austrian Institute of Economic Research, Arsenal, Objekt 20, 1030 Vienna, Austria;4. CEPR, 77 Bastwick Street, London EC1V 3PZ, United Kingdom |
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| Abstract: | We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions. Using data from Austrian construction procurements, we estimate bidders׳ construction costs within a private value auction model. We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 percentage points. We also find that without the government stimulus package this decrease would have been larger. These two pieces of evidence point to pro-cyclical markups. |
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| Keywords: | Construction procurement First-price auctions Private values Economic crisis Government stimulus |
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