Видеозапись семинара "Favoritism and entry costs in procurement auctions"

Speaker: Maria Ostrovnaya (Junior Research Fellow at the International Research Laboratory for Institutional Analysis of Economic Reforms, NRU HSE)

Co-author: Elena Podkolzina (Assistant Professor at the Faculty of Economics, Senior Research Fellow at the International Research Laboratory for Institutional Analysis of Economic Reforms, NRU HSE)

June 18, Thursday, Myasnitskaya 24, building 3, room 424, 17.30. 

In many countries governments attempt to increase competition in public procurement by reducing entry costs of companies. However theoretical models show that higher number of companies does not necessarily lead to lower procurement prices if entry is endogenous. This link becomes even less obvious in corrupt environment. Meanwhile there are few studies on this issue and we try to fill this gap. The purpose of this paper is to examine how entry costs influence favoritism and prices paid by corrupt and benevolent procurers. We adapt Samuelson's model of endogenous entry to corrupt environment and focus on relationships between one procurer and its favorite company. Our model shows a different effect of entry costs on prices paid by different procurers. While lower entry costs always reduce prices paid by the benevolent procurer, they have positive impact or no impact at all on prices paid by the corrupt one. Further we are going to test this result on Russian procurement data.