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The effect of price on the quality of public construction in Japan

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  • Hatsumi, Kentaro
  • Ishii, Rieko

Abstract

We examine whether the price affects the contractor’s choice of quality using the ex-post quality evaluation data of public construction projects conducted by Ise City in Japan. Ise City employs a sealed-bid first-price auction with reserve and minimal prices in the selection of contractors. Upon completion of the project, Ise City evaluates the quality of the work using a 100-point scale score based on items such as administration, safety, time management, external appearance, and functionality. Our results show that the winning price in the auction does not affect the quality of the work. We discuss several reasons behind this finding.

Suggested Citation

  • Hatsumi, Kentaro & Ishii, Rieko, 2022. "The effect of price on the quality of public construction in Japan," Japan and the World Economy, Elsevier, vol. 62(C).
    • Handle: RePEc:eee:japwor:v:62:y:2022:i:c:s0922142522000196
    DOI: 10.1016/j.japwor.2022.101134
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    References listed on IDEAS

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