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Competition in the economic crisis: Analysis of procurement auctions

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  • Gugler, Klaus
  • Weichselbaumer, Michael
  • Zulehner, Christine

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.

Suggested Citation

  • Gugler, Klaus & Weichselbaumer, Michael & Zulehner, Christine, 2015. "Competition in the economic crisis: Analysis of procurement auctions," European Economic Review, Elsevier, vol. 73(C), pages 35-57.
    • Handle: RePEc:eee:eecrev:v:73:y:2015:i:c:p:35-57
    DOI: 10.1016/j.euroecorev.2014.10.007
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    Cited by:

    1. Seres, G. & Pigon, Adam, 2019. "On the Competitive Effects of Screening in Procurement," Discussion Paper 2019-019, Tilburg University, Center for Economic Research.
    2. Zulehner, Christine & Gugler, Klaus & Weichselbaumer, Michael, 2017. "Effects of government spending on employment: Evidence from winners and runners-up in procurement auctions," CEPR Discussion Papers 12548, C.E.P.R. Discussion Papers.
    3. Stjepan Srhoj & Melko Dragojević, 2024. "Public Procurement and Supplier Job Creation: Insights from Auctions," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 40(2), pages 470-527.
    4. N. N., 2019. "WIFO-Monatsberichte, Heft 8/2019," WIFO Monatsberichte (monthly reports), WIFO, vol. 92(8), August.
    5. de Leverano, Adriano, 2019. "Collusion through market sharing agreements: Evidence from Quebec's road paving market," ZEW Discussion Papers 19-053, ZEW - Leibniz Centre for European Economic Research.
    6. Gugler, Klaus & Weichselbaumer, Michael & Zulehner, Christine, 2020. "Employment behavior and the economic crisis: Evidence from winners and runners-up in procurement auctions," Journal of Public Economics, Elsevier, vol. 182(C).
    7. Michael Klien, 2019. "Entwicklung der Baukonjunktur 2011/2018 und Ausblick," WIFO Studies, WIFO, number 61845.
    8. Zulehner, Christine & Gugler, Klaus Peter & Weichselbaumer, Michael, 2015. "Analysis of mergers in first-price auctions," CEPR Discussion Papers 10799, C.E.P.R. Discussion Papers.
    9. Honda, Jun, 2015. "Intermediary Search for Suppliers in Procurement Auctions," Department of Economics Working Paper Series 203, WU Vienna University of Economics and Business.
    10. Ionel Preda, 2019. "The Information Content Of Audit Opinion For Users Of Financial Statements," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 4(2), pages 102-111, September.
    11. Seres, G. & Pigon, Adam, 2019. "On the Competitive Effects of Screening in Procurement," Other publications TiSEM 3314c398-ea79-4f74-96f4-8, Tilburg University, School of Economics and Management.
    12. Jääskeläinen, Jan & Tukiainen, Janne, 2019. "Anatomy of public procurement," Working Papers 118, VATT Institute for Economic Research.
    13. Michael Klien & Werner Hölzl, 2019. "Öffentliche Ausschreibungen und Konjunktur. Eine Analyse mit unkonventionellen Daten für die österreichische Bauwirtschaft," WIFO Monatsberichte (monthly reports), WIFO, vol. 92(8), pages 609-618, August.

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    More about this item

    Keywords

    Construction procurement; First-price auctions; Private values; Economic crisis; Government stimulus;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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