Paper #377

Title:

Heterogeneity-promoting optimal procurement

Authors:

Juan J. Ganuza and Lambros Pechlivanos

Date:

January 1998 (Revised: January 1999)

Abstract:

When procurement takes place in the presence of horizontally differentiated contractors, the design of the object being procured affects the resulting degree of competition. This paper highlights the interaction between the optimal procurement mechanism and the design choice. Contrary to conventional wisdom, the sponsor's design choice, instead of homogenizing the market to generate competition, promotes heterogeneity.

Keywords:

Procurement, project design, horizontal differentiation

JEL codes:

L51, H57, D44

Area of Research:

Microeconomics

Published in:

Economic Letters, 67, (2000), pp. 105-112

Download the paper in PDF format