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Reputation and Entry

Author

Listed:
  • Jeffrey V. Butler

    (EIEF)

  • Enrica Carbone

    (University of Naples "SUN")

  • Pierluigi Conzo

    (CSEF)

  • Giancarlo Spagnolo

    (Stockholm School of Economics-SITE, University of Rome "Tor Vergata" and CEPR)

Abstract
This paper reports results from a laboratory experiment exploring the relationship between reputation and entry in procurement. There is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new (smaller or foreign) firms in public procurement markets. Our results suggest that while some reputational mechanisms indeed reduce the frequency of entry, so that the concern is warranted, appropriately designed reputation mechanisms actually stimulate entry. Since quality increases but not prices, our data also suggest that the introduction of reputation may generate large welfare gains for the buyer.

Suggested Citation

  • Jeffrey V. Butler & Enrica Carbone & Pierluigi Conzo & Giancarlo Spagnolo, 2012. "Reputation and Entry," EIEF Working Papers Series 1215, Einaudi Institute for Economics and Finance (EIEF), revised Nov 2012.
    • Handle: RePEc:eie:wpaper:1215
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    References listed on IDEAS

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    Cited by:

    1. Decio Coviello & Luigi Moretti & Giancarlo Spagnolo & Paola Valbonesi, 2018. "Court Efficiency and Procurement Performance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 826-858, July.
    2. Matilde Cappelletti & Leonardo M. Giuffrida, 2024. "Targeted Bidders in Government Tenders," CESifo Working Paper Series 11142, CESifo.
    3. Tukiainen, Janne & Blesse, Sebastian & Bohne, Albrecht & Giuffrida, Leonardo M. & Jääskeläinen, Jan & Luukinen, Ari & Sieppi, Antti, 2021. "What are the priorities of bureaucrats? Evidence from conjoint experiments with procurement officials," ZEW Discussion Papers 21-033, ZEW - Leibniz Centre for European Economic Research.
    4. Spagnolo, Giancarlo, 2012. "Reputation, competition, and entry in procurement," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 291-296.
    5. Visa Pitkänen, 2022. "Competition and efficiency in repeated procurements: Lessons from the Finnish rehabilitation markets," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 820-835, May.

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    More about this item

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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