11. Oktober 2019

Brown Bag Seminar Industrial Economics

Evaluation of Bidding Groups in First-price Auctions


11. Oktober 2019
10:30 - 11:30


Anna J. Schwartz Room
Room 5.2.010
Mohrenstraße 58
10117 Berlin


Christine Zulehner, University of Vienna

Abstract: In this paper, we analyze bidding groups that participate in procurement auctions. Our main question is to ask, whether in the absence of the joint bid, there could have been two or more independent bids and if yes, these bids yield a different final outcome. We utilize data from the Austrian construction sector and estimate models of first-price sealed-bid auctions with endogenous entry. Based on the estimated bidding distributions and bidders' entry behavior, we run counterfactual simulations and aim to disentangle the market power effect from potential cost efficiencies. We find that the auctioneer does not benefit from dissolving bidding groups. Although participation decreases only slightly, wining bids increase by about two percent. When bidding groups are forbidden, then other firms - less efficient ones - enter in the bidding process. We also find that a policy that allows only small firms to form a bidding group is to the disadvantage of the auctioneer.


Christine Zulehner, University of Vienna