Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248486 
Year of Publication: 
2021
Series/Report no.: 
DIW Discussion Papers No. 1983
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
We consider a Green Public Procurement setting where the procurer provides a bid discount to environment-friendly technologies to foster their use. We assume that, before the auction, firms may switch to green technology via a publicly observable costly investment. We show that investment acts as a signaling device. This mitigates the effect of incomplete information on firms' costs, thereby triggering more competitive bidding, which results in lower prices for the procurer. Therefore, even a procurer with no preference toward green technology can find it optimal to use a discount. Our results challenge the common perception that Green Public Procurement always implies a trade-off between environmental performance and purchasing price.
Subjects: 
Public Procurement
Environmental Policy
Auctions
JEL: 
D44
H57
Q58
Q55
Document Type: 
Working Paper

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