Dynamic auction environment with subcontracting

• Autores: Przemyslaw Jeziorski, Elena Krasnokutskaya
• Localización: The Rand Journal of Economics, ISSN-e 1756-2171, Vol. 47, Nº. 4, 2016, págs. 751-791
• Idioma: inglés
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• Resumen

  • This article provides evidence on the role of subcontracting in the auction-based procurement setting with private cost variability and capacity constraints. We demonstrate that subcontracting allows bidders to modify their costs realizations in a given auction as well as to control their future costs by reducing backlog accumulation. Restricting access to subcontracting raises procurement costs for an individual project by 12% and reduces the number of projects completed in equilibrium by 20%. The article explains methodological and market design implications of subcontracting availability.