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An Empirical Analysis of Entrant and Incumbent Bidding in Road Construction Auctions

Research output: Contribution to journalJournal article

Published

Journal publication date09/2003
JournalJournal of Industrial Economics
Journal number3
Volume51
Number of pages22
Pages295-316
Original languageEnglish

Abstract

This paper explores differences in the bidding patterns of entrants and incumbents in road construction auctions. We find that entrants bid more aggressively and win auctions with significantly lower bids than incumbents. The differences in their bidding patterns are consistent with a model of auctions in which the distribution of an entrant's costs exhibits greater dispersion than that of an incumbent's and relations of stochastic dominance in the distributions do not persist for the entire range of estimated costs. We also find that more efficient firms bid, on average, more aggressively and firms with greater backlogs bid less aggressively.