Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96901
Authors: 
Cole, Matthew T.
Davies, Ronald B.
Year of Publication: 
2014
Series/Report no.: 
CESifo Working Paper 4691
Abstract: 
Until recently, government procurement bidding processes have generally favored domestic firms by awarding the contract to a domestic firm even if a foreign firm tenders a lower bid, so long as the difference between the two is sufficiently small. This has been replaced by an agreement abolishing this practice. However, the presence of other trade barriers, such as tariffs, can continue to disadvantage foreign firms. We analyze the bidding strategies in such a game and show that when domestic profits are valued, tariffs will be used to discriminate against foreign firms. Furthermore, we find that optimal tariffs can be more protectionist than the optimal price preference, resulting in lower expected domestic welfare and total surplus.
Subjects: 
government procurement
tariffs
price preference
JEL: 
F13
H57
F12
Document Type: 
Working Paper

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