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A Bid Strategy for Earlier Payment: Evidence and Implications of Front-End Loading in Procurement

Author

Listed:
  • Justin Marion
  • Benjamin Rosa

Abstract

Liquidity management is key in industries with variable cash flows. We study how businesses in the highway construction industry manage cash flow by strategically bidding more on work with an earlier payout—a practice known as front-end loading. We find that small contractors, infrequent bidders, and Disadvantaged Business Enterprises front-end load more intensely, indicating a stronger preference for earlier payment. An equilibrium bidding model highlights a novel pathway through which this preference can affect procurement and its managerial and policy implications.

Suggested Citation

  • Justin Marion & Benjamin Rosa, 2025. "A Bid Strategy for Earlier Payment: Evidence and Implications of Front-End Loading in Procurement," NBER Working Papers 33606, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33606
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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • 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
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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