2006 Volume 6 Pages 113-124
This article presents a quantitative analysis of the economic effect of bidders' strategic behaviors in competitive bidding processes.
Previous analyses pointed that the efficacy of competitive bidding would be compromised by bidders' covert strategic behaviors, even if the bidding were conducted normally, without bid rigging. However, the economic effect of bidders' strategic behaviors has not been empirically investigated on a systematic basis. In consequence, it is not clear whether or not bidders' strategic behaviors generate economic loss.
This article estimates quantitatively the economic effect of bidders' strategic behaviors, using the data of competitive biddings for public procurement of information systems. The results of my analysis suggest that the economic loss resulting from bidders' strategic behaviors is significant, and that in order for competitive biddings to be more effective, institutional devices designed to curb bidders' strategic behaviors are necessary as well as devices that enhance competition in bidding ' processes.
