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Foreign bidders going once, going twice... Protection in government procurement auctions
Author(s)
Date Issued
2014-02
Date Available
2014-02-13T09:21:02Z
Abstract
Until recently, government procurement bidding processes have generally favored
domestic firms by awarding the contract to a domestic firm even if a foreign firm tenders
a lower bid, so long as the difference between the two is sufficiently small. This has
been replaced by an agreement abolishing this practice. However, the presence of other
trade barriers, such as tariffs, can continue to disadvantage foreign firms. We analyze
the bidding strategies in such a game and show that when domestic profits are valued,
tariffs will be used to discriminate against foreign firms. Furthermore, we find that
optimal tariffs can be more protectionist than the optimal price preference, resulting
in lower expected domestic welfare and total surplus.
Sponsorship
Not applicable
Type of Material
Working Paper
Publisher
University College Dublin. School of Economics
Series
UCD Centre for Economic Research Working Paper Series
WP14/01
Web versions
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
File(s)
Owning collection
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