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The Characteristics of Low Bid Price Survey Standards and Their Impact

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  • Koki Arai

    (Kyoritsu Women’s University)

Abstract

This study aims to show that the low bid price survey standard has lower limit price characteristics and analyzes the behavior of firms in the public procurement market where the lower price limit is set. This study uses regression analysis to investigate the effects of exogenously determined low-price survey standards and predetermined prices on the winning bid ratio, the number of participants, the participants’ bid ratio, the difference between the second-place price and the winning bid, the second bid, and the single bidder’s bid. The results show that the winning bid ratio increased with a rise in the low-price survey standard, thereby indicating that the low-price survey standard has the characteristics of a lower limit price. The results also suggest that the low-price survey standard causes oversupply, which encourages firms to carefully set prices higher than the lower price limit, and intensify competition at levels higher than the lower limit price.

Suggested Citation

  • Koki Arai, 2021. "The Characteristics of Low Bid Price Survey Standards and Their Impact," Journal of Industry, Competition and Trade, Springer, vol. 21(4), pages 593-608, December.
    • Handle: RePEc:kap:jincot:v:21:y:2021:i:4:d:10.1007_s10842-021-00372-6
    DOI: 10.1007/s10842-021-00372-6
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    References listed on IDEAS

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    1. Price V. Fishback & Andrew J. Seltzer, 2021. "The Rise of American Minimum Wages, 1912–1968," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 73-96, Winter.
    2. Alan Manning, 2021. "The Elusive Employment Effect of the Minimum Wage," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 3-26, Winter.
    3. Arindrajit Dube & Attila Lindner, 2021. "City Limits: What Do Local-Area Minimum Wages Do?," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 27-50, Winter.
    4. Koki Arai & Emi Morimoto, 2017. "Construction Industry and Competition Policy in Japan," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 24(3), pages 345-363, September.
    5. Jeffrey Clemens, 2021. "How Do Firms Respond to Minimum Wage Increases? Understanding the Relevance of Non-employment Margins," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 51-72, Winter.
    6. Colin Kirkpatrick & David Parker & Yin-Fang Zhang, 2005. "Price and Profit Regulation in Developing and Transition Economies: A Survey of the Regulators," Public Money & Management, Taylor & Francis Journals, vol. 25(2), pages 99-105, April.
    7. Koki Arai & Emi Morimoto, 2019. "The Construction Industry and (Dis)Economies of Scope: Empirical Research in the Hokkaido Procurement Auction," Journal of Industry, Competition and Trade, Springer, vol. 19(2), pages 281-292, June.
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    More about this item

    Keywords

    Low bid price survey standards; Japanese economy; Oversupply; Public procurement;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction

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