Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/126610
Authors: 
Lalive, Rafael
Schmutzler, Armin
Zulehner, Christine
Year of Publication: 
2015
Series/Report no.: 
Working Paper Series, University of Zurich, Department of Economics 209
Abstract: 
Public agencies mainly rely on two modes to procure goods and services: auctions and direct negotiations. We study a 1994 policy change in Germany that introduced the possibility to procure rail services in auctions as well as in direct negotiations with the incumbent. We analyze the effect of the procurement mode on service frequency and procurement price. Our analysis relies on self-collected data on the frequency of rail service on about 500 rail lines. We first develop a theoretical framework to study an agency's decision on the procurement mode. We then use this framework to guide our empirical analysis on rail service, procurement price, and choice of procurement mode. Results indicate that, compared with negotiations, auctions improve service levels and reduce prices. As a result, surplus on auctioned lines increased by about 30%. Interestingly, surplus would also have increased by 16% on negotiated lines had auctions been used. We argue that the predominance of non-competitive modes reflects (actual or perceived) administrative costs of carrying out auctions.
Subjects: 
auctions
negotiations
liberalization
passenger railways
public procurement
JEL: 
D43
D44
R48
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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