Skip Navigation


Journal of Law, Economics, and Organization Advance Access originally published online on May 7, 2008
Journal of Law, Economics, and Organization 2009 25(2):372-399; doi:10.1093/jleo/ewn002
This Article
Right arrow Full Text
Right arrow Full Text (PDF)
Right arrow All Versions of this Article:
25/2/372    most recent
ewn002v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrow Search for citing articles in:
ISI Web of Science (1)
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Bajari, P.
Right arrow Articles by Tadelis, S.
Related Collections
Right arrow D23 - Organizational Behavior; Transaction Costs; Property Rights
Right arrow D82 - Asymmetric and Private Information
Right arrow H57 - Procurement
Right arrow L14 - Transactional Relationships; Contracts and Reputation; Networks
Right arrow L22 - Firm Organization and Market Structure
Right arrow L74 - Construction
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© The Author 2008. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Auctions Versus Negotiations in Procurement: An Empirical Analysis

Patrick Bajari*

University of Minnesota and NBER

Robert McMillan**

Federal Trade Commission

Steven Tadelis***

University of California, Berkeley

* Department of Economics, University of Minnesota and NBER, 1035 Heller Hall, 271 19th Avenue South, Minneapolis, MN 55455, USA. Email: bajari{at}econ.umn.edu

** Federal Trade Commission, 600 Pennsylvania Avenue, NW Washington, DC 20580. Email: rob.mcmillan{at}gmail.com

*** Haas School of Business, University of California, Berkeley, 545 Student Services Building, CA 94720-1900, USA. Email: stadelis{at}haas.berkeley.edu

Should the buyer of a customized good use competitive bidding or negotiation to select a contractor? To shed light on this question, we consider several possible determinants that may influence the choice of auctions versus negotiations. We then examine a comprehensive data set of private sector building contracts awarded in Northern California during the years 1995–2000. The analysis suggests a number of possible limitations to the use of auctions. Auctions may perform poorly when projects are complex, contractual design is incomplete, and there are few available bidders. Furthermore, auctions may stifle communication between buyers and sellers, preventing the buyer from utilizing the contractor's expertise when designing the project. Some implications of these results for procurement in the public sector are discussed (JEL D23, D82, H57, L14, L22, L74).


Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?




Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.