TY  - JOUR
AU  - Bajari,Patrick
AU  - McMillan,Robert S.
AU  - Tadelis,Steve 
TI  - Auctions Versus Negotiations in Procurement: An Empirical Analysis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9757
PY  - 2003
Y2  - June 2003
UR  - http://www.nber.org/papers/w9757
L1  - http://www.nber.org/papers/w9757.pdf
N1  - Author contact info:
Patrick Bajari
University of Washington
331 Savery Hall
UW Economics Box 353330
Seattle, Washington 98195-3330
E-Mail: Bajari@uw.edu

Robert McMillan
E-Mail: rob.mcmillan@gmail.com
AB  - Should the buyer of a customized good use competitive bidding or negotiation to select a contractor? To shed light on this question, we offer a framework that compares auctions with negotiations. We then examine a comprehensive data set of private sector building contracts awarded in Northern California during the years 1995-2000. The analysis suggests a number of potential limitations to the use of auctions. Auctions perform poorly when projects are complex, contractual design is incomplete and there are few available bidders. Furthermore, auctions stifle communication between buyers and the sellers, preventing the buyer from utilizing the contractor's expertise when designing the project. Some implications of these results for procurement in the public sector are discussed.
ER  -