Foreign bidders going once, going twice... Protection in government procurement auctions

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Title: Foreign bidders going once, going twice... Protection in government procurement auctions
Authors: Cole, Matthew T.
Davies, Ronald B.
Permanent link: http://hdl.handle.net/10197/5389
Date: Feb-2014
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 This has been replaced by an agreement abolishing this practice.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.
Funding Details: Not applicable
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP14/01
Keywords: TariffsGovernment procurementPrice preference
Other versions: http://www.ucd.ie/t4cms/WP14_01.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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