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A Spatial Model of Competitive Bidding for Government Grants: Why Efficiency Gains Are Limited

Author

Listed:
  • Hugh Ward

    (University of Essex, hugh@essex.ac.uk)

  • Peter John

    (University of Manchester, Peter.John@ manchester.ac.uk)

Abstract

With a view to improving public sector efficiency many governments now make public sector bodies competitively bid for funding. We model the bidding process as a game of spatial competition. Using Monte Carlo simulations we show that in efficient equilibria many bidding groups will not be under competitive pressure. The model suggests that this is because their ideal projects are inherently valuable for the funding agency and other groups cannot match this without departing so far from their ideal that they would rather not be successful. We test the hypothesis that competition will be limited largely to groups whose preferred projects are of medium quality on data from the UK Single Regeneration Budget. Using resubmitted bids to track the impact of competition, we find evidence consistent with this hypothesis.

Suggested Citation

  • Hugh Ward & Peter John, 2008. "A Spatial Model of Competitive Bidding for Government Grants: Why Efficiency Gains Are Limited," Journal of Theoretical Politics, , vol. 20(1), pages 47-66, January.
    • Handle: RePEc:sae:jothpo:v:20:y:2008:i:1:p:47-66
    DOI: 10.1177/0951629807084039
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    References listed on IDEAS

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