International Workshop on Competition, Regulation and Procurement

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Abstracts 2018

MAY 28

MAY 29

Market Power and Volatility in the Airline Industry
Philippe Gagnepain (PSE, Université Paris 1), Alexandra Belova (PSE, Université Paris 1), Stéphane Gauthier (PSE, Université Paris 1)
April 30, 2018
In a strategic game where firms compete against each other, the set of rationalizable strategies for each player entails all the best responses to the other's decisions. The theoretical litterature has suggested that the uniqueness of the rationalizable outcomes coincides with the Nash equilibrium of the game. This paper proposes an empirical test of the existence of the uniqueness of the Nash equilibrium in a Cournot oligopoly. We focus on the U.S. airline industry and develop a theoretical model of competition on each route. It is assumed that airlines are not always able to predict perfectly the behavior of the competitors which can result in multiplicity of rationalizable outcomes. Based on the supply and demand ingredients of our model, we construct a stability criterion which guarantees uniqueness. We conclude that more than 90% of the local markets observed in the U.S. airline industry have reached the unique possible Nash equilibrium. As a by-product, we also identify the main determinants which prevent firms from reaching an equilibrium. We show in particular that local markets which include a higher number of competitors are the ones where the quantity produced is more volatile.

An Experimental Study on Sequential Auctions with Privately Known Capacities
Stefano Galavotti (University of Padua), Luca Corazzini (Ca Foscari University of Venice), Paola Valbonesi (University of Padova)
April 17, 2018
We experimentally study sequential rst-price procurement auctions where bidders' capacity constraints are private information. Our results show that: (i) bids in the second auction conforms with sequential rationality; (ii) although rst auction's bids negatively depend on capacity, bidders seem unable to recognize this link when, after the rst auction, they state their beliefs. We conjecture that bidding in the first auction is also affected by a hidden, behavioral type — related to the strategic sophistication of bidders — that obfuscates the link between capacity and bids. Building on this intuition, we show that a simple level-k model may help explain the inconsistency.
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Bureaucratic Competence and Procurement Outcomes
Vincenzo Mollisi (Free University of Bozen-Bolzano), Francesco Decarolis (Boston University), Leonardo M. Giuffrida (University of Rome Tor Vergata), Elisabetta Iossa (University of Rome Tor Vergata), Giancarlo Spagnolo (SITE-Stockholm School of Economics)
May 14, 2018
Does a more competent public bureaucracy contribute to better economic outcomes? We address this question in the context of the US federal procurement of services and works by combining contract-level data on procurement performance and bureau-level data on competence and workforce characteristics. Using an instrumental variable strategy, we nd that an increase in bureau competence causes a signi cant and economically important reduction in: (i) delays, (ii) cost overruns, and (iii) number of renegotiations. Cooperation within the office appears to be a key driver of the ndings. Keywords: Buyer quality, competence, procurement, public management, state capacity.
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All for One and One for All! How Do Corruption Investigations Affect Municipalities’ Public Procurement Choices?
Marion Chabrost (Paris School of Economics – Université Paris 1 Panthéon-Sorbonne) and  Stéphane Saussier (IAE Paris – Sorbonne Business School)
May 2, 2018
Using data on public procurement, we assess the impact of opening a public investigation into French municipalities’ choice of award procedures. We observe that municipalities that are suspected of being corrupt do not change their practices. We argue that such municipalities have no interest in change as long as the investigation is pending. Conversely, our results indicate that neighboring municipalities do adapt their award procedures to reduce the probability of being identified as corrupt. We conclude that even if investigations rarely lead to convictions, they are nevertheless more efficient than might appear at first glance through their positive externalities in the form of disciplining potentially corrupt neighboring municipalities.

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