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Empirical analysis of unbalanced bidding on Swedish roads

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Abstract

Based on anecdotal evidence, claims are made that unbalanced bidding is a major problem in the construction industry. This concept refers to a sealed price auction setting with asymmetric information and unit prices, where information rents are extracted. Theoretical literature has shown that it is rational for an informed contractor to skew unit prices. However, empirical studies on the magnitude of the problem are lacking. As the first quantitative study based on European data, it is shown that unbalanced bidding exists, but in small magnitudes. The result is in line with earlier studies from the US.

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  • Nyström, Johan & Wikström, Daniel, 2019. "Empirical analysis of unbalanced bidding on Swedish roads," Working Papers 2019:4, Swedish National Road & Transport Research Institute (VTI).
    • Handle: RePEc:hhs:vtiwps:2019_004
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    More about this item

    Keywords

    Unbalanced bidding; Asymmetric information; Information rent;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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