Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/204732 
Year of Publication: 
2012
Series/Report no.: 
SITE Working Paper No. 21
Publisher: 
Stockholm School of Economics, Stockholm Institute of Transition Economics (SITE), Stockholm
Abstract: 
This paper reports results from a laboratory experiment exploring the relationship between reputation and entry in procurement. There is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new (smaller or foreign) firms in public procurement markets. Our results suggest that while some reputational mechanisms indeed reduce the frequency of entry, so that the concern is warranted, appropriately designed reputation mechanisms actually stimulate entry. Since quality increases but not prices, our data also suggest that the introduction of reputation may generate large welfare gains for the buyer.
Subjects: 
Entry
Feedback mechanisms
Governance
Incomplete contracts
Limited enforcement
Incumbency
Multidimensional competition
Participation
Past performance
Procurement
Quality
Reputation
Vendor rating
JEL: 
H57
L14
L15
Document Type: 
Working Paper

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