Faculty of Economics and Business Administration Publications Database

Competition in the economic crisis: Analysis of procurement auctions

Gugler, Klaus
Weichselbaumer, Michael
Volume: 73
Pages: 35 - 57
Month: January
ISSN-Print: 0014-2921
Link External Source: Online Version
Year: 2015
Keywords: Construction procurement; First-price auctions; Private values; Economic crisis; Government stimulus

We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions. Using data from Austrian construction procurements, we estimate bidders׳ construction costs within a private value auction model. We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 percentage points. We also find that without the government stimulus package this decrease would have been larger. These two pieces of evidence point to pro-cyclical markups.