Is subsidizing inefficient bidders actually costly?

• 成果类型: Article
• 署名作者: Rothkopf, MH; Harstad, RM; Fu, YH
• 署名单位: Rutgers University System; Rutgers University New Brunswick; Rutgers University System; Rutgers University New Brunswick
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.49.1.71.12748
• 发表日期: 2003
• 页码: 71-84
• 关键词: Auctions; subsidies; disadvantaged competitors; affirmative action; set-asides; procurement costs

摘要

A widespread practice, particularly in public-sector procurement and dispersal, is to subsidize a class of competitors believed to be at an economic disadvantage. Arguments for such policies vary, but they typically assume that benefits of subsidization must be large enough to outweigh a presumed economic cost of the subsidy. When disadvantaged competitors compete in auctions, the subsidy serves to. make them more competitive rivals. Other bidders rationally respond by bidding more aggressively. We consider a model of procurement auctions and show that a policy of subsidizing inefficient competitors can lower expected project cost and also enhance economic efficiency. Some subsidy is generally better than no subsidy for-a wide range of parameters.