Nicola Doni

THE ECONOMICS OF PROCUREMENT CONTRACT AWARDING: PROBLEMS AND SOLUTIONS IN THEORY AND PRACTICE

The main aim of this paper is to review some of the newest and most promising advances in auction theory with an eye to applications to procurement practice. Here we focus in particular on four topics related to multidimensional auctions: 1) how to define a proper scoring rule when the awarding bodies lack the necessary information regarding its own preferences and suppliers’ technology; 2) how to cope with the information disclosure policy regarding the discretional evaluation of some aspects of each contractual proposal; 3) how to use contractors’ reputations based on their past performance in the awarding process; 4) how to control the risk of collusion and corruption in the awarding phase.

A Comparison of Alternative Procedures for the Selection of the Private Partner in PPP Projects

In this work we compare three alternative procedures aimed at selecting a private partner in PPP projects: i.e. negotiation, auction and competitive negotiation. We show how the suitability of each of these selection mechanisms depends on many economic and institutional factors: e.g. the extent of contractual complexity, the degree of heterogeneity in firm costs, the level of competition, the probability of corruption. The main lesson of the paper is that the adoption of competitive negotiation can improve public welfare only if the institutional framework can ensure both an actual contestability of each contract and a low risk of corruption phenomena.

Revenue Comparison in Asymmetric Auctions with Discrete Valuations

Abstract We consider an asymmetric auction setting with two bidders such that the valuation of each bidder has a binary support. First, we characterize the unique equilibrium outcome in the first price auction for any values of parameters. Then we compare the first price auction with the second price auction in terms of expected revenue. Under the assumption that the probabilities of low values are the same for the two bidders, we obtain two main results: (i) the second price auction yields a higher revenue unless the distribution of a bidder’s valuation first-order stochastically dominates the distribution of the other bidder’s valuation “in a strong sense” and (ii) introducing reserve prices implies that the first price auction is never superior to the second price auction. In addition, in some cases, the revenue in the first price auction decreases when all the valuations increase.

Competition and Regulation in Franchise Bidding

In this work we show that the separation property identified in the franchise bidding literature depends strictly on the hypothesis of coincidence of the regulators beliefs with those of the competing firms. Nevertheless, in many contexts it is more truthful to hypothesize that the regulators information is vaguer than that of the producers, so we introduce the possibility that the regulator is dealing with a double informational asymmetry as compared to the firms. In this case, the separation property is no longer valid, and the optimal tariff becomes a decreasing function of the degree of competition exercised during the auction.

L'affidamento mediante gara di contratti pubblici: l'importanza della reputazione

In this paper we highlight how, in awarding public contracts, the reputation of the firms does not receive the same consideration in the legislation of different countries. In our analysis we show which are the potential negative consequences of awarding rules that, as in Italy, neglect this factor; consequently our model justifies the practice of those countries in which some kind of reputational mechanisms are utilized. The main economic literature emphasizes that the efficiency of the awarding procedure depends on the type of contractual rules, especially those regarding firms remuneration. In this work we show the existence of a reverse link: when the enforcement of contractual terms is imperfect, the rules of the awarding mechanism can help to improve the efficiency of the contractual relationship. In some circumstances, awarding rules based only on the contents of each bid are not able to deal with the problem of opportunistic behaviour during the execution of the contract. Our model points out that the public administration can incentive the fairness of the contractor by considering not only the bids of the competitors, but also their different reputation.

Information Revelation in Procurement Auctions with Two-Sided Asymmetric Information

A buyer needs to procure a good from one of two suppliers offering differentiated products and with privately observed costs. The buyer privately observes the own valuations for the products and (ex ante) decides how much of this information should be revealed to suppliers before they play a first score auction. Our main result is that the more significant is each suppliers private information on the own cost, the less information the buyer should reveal. We also examine the buyers incentives to make untruthful announces.

Pricing and Price Regulation in a Customer-Owned Monopoly

In the first part of the paper we study the pricing policies of a customer-owned firm in the absence of external regulation. The profit-sharing rule is a key element of the price choice and our analysis focuses on the two most common ones, uniform and proportional. The main result is that the self-discipline effect generally ensures the dominance of customer-ownership over investor-ownership in welfare terms, though under neither rule it is enough to attain the first-best in equilibrium. Then, customer-owned firms, like forprofit ones, need some external price regulation. In the second part we address this topic. We show first that the optimal regulatory policies for investor-owned service providers are not optimal for customerowned ones, and hence price regulation is affected by the ownership mode. Another factor that is shown to condition the effectiveness of regulation is the sharing rule. The paper closes with a few results on the optimal regulatory design for customer-owned firms.