WILD BIDS . GAMBLING FOR RESURRECTION IN PROCUREMENT CONTRACTS ¤

@inproceedings{Calveras2001WILDB,
  title={WILD BIDS . GAMBLING FOR RESURRECTION IN PROCUREMENT CONTRACTS ¤},
  author={Aleix Calveras and Juan-Jos{\'e} Ganuza and Esther Hauk},
  year={2001}
}
This paper analyzes the problem of abnormally low tenders in the procurement process. Limited liability causes ̄rms in a bad ̄nancial situation to bid more aggressively than ̄nancially healthy ̄rms in the procurement auction. Therefore, it is likely that the winning ̄rm is a ̄rm in ̄nancial di±culties with a high risk of bankruptcy. The paper focuses on the regulatory practice of surety bonds to face this problem. We show that the use of surety bonds reduces and sometimes eliminates the… CONTINUE READING

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