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Title:Discrimination in dynamic procurement design with learning-by-doing PDF Logo
Authors:Barbosa, Klenio
Boyer, Pierre C.
Issue Date:2012
Series/Report no.:CESifo Working Paper: Public Finance 3947
Abstract:Discriminatory programs that favor local and small firms in government procurement are common in many countries. This paper studies the long-run impact of procurement discrimination on market structure and future competition in industries where learning-by-doing makes incumbent firms more efficient over time. We consider a sequential procurement design problem in which local and global firms compete for public good provision. Both firms benefit from learning-by-doing if they provide the public good in the previous period but global firms only may be able to transfer learning-by-doing from different markets. We find that the optimal procurement has to be biased in favor of the local firm even when all firms are symmetric with respect to their initial cost distribution. This bias fosters future competition and reduces intertemporal expected transfers to providers.
Subjects:discrimination
dynamic procurement
local versus global firms
learning-by-doing
JEL:D44
H57
H70
H87
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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