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2014 (published: 15.09.2014)
Number 3(18)
Home > Issue > About specific causes of monopolization of public procurement market, or how to "kill" competition with auctions
Khvalynskiy D.S.
For 8 years the reverse English auctions are taken root into the Russian system of public procurement. Auction theory is have been developing in the world economic science for many years. Foreign researchers came to the conclusion that the English auction, as well as its reverse copy, goes to monopoly in the absence of «symmetry of participants». Another problem, which reduces competition in the English auction is the effect of the «winner's curse». As a result, even a slight advantage in power allows the participant win the English auction almost every time. These conclusions are supported by the Russian procurement practice. More than 50% of the public contracts in Russia(by value), based on the results of electronic auctions, aresignedin the absence of competition. And in just one year the level of competition in the Russian auctions decreased by 52%. The author concludes that the system of public procurement in Russia does not consider to the main results of global research in the field of auction theory, the use of English reverse auctions has a significant negative impact on competition in Russian public procurement and leads to monopolization of some markets. The author notes that in recent decades in foreign practice have been developed different kinds of the auctions, allowing to maximize the competition, and he offers to provide an immediate transition to a more competitive procurement methods.
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Keywords: Identification of suppliers (contractors, executors), public order, public procurement, efficiency, competition, contract system in the sphere of procurement, auction.
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
UDC 351.72
About specific causes of monopolization of public procurement market, or how to "kill" competition with auctions
For 8 years the reverse English auctions are taken root into the Russian system of public procurement. Auction theory is have been developing in the world economic science for many years. Foreign researchers came to the conclusion that the English auction, as well as its reverse copy, goes to monopoly in the absence of «symmetry of participants». Another problem, which reduces competition in the English auction is the effect of the «winner's curse». As a result, even a slight advantage in power allows the participant win the English auction almost every time. These conclusions are supported by the Russian procurement practice. More than 50% of the public contracts in Russia(by value), based on the results of electronic auctions, aresignedin the absence of competition. And in just one year the level of competition in the Russian auctions decreased by 52%. The author concludes that the system of public procurement in Russia does not consider to the main results of global research in the field of auction theory, the use of English reverse auctions has a significant negative impact on competition in Russian public procurement and leads to monopolization of some markets. The author notes that in recent decades in foreign practice have been developed different kinds of the auctions, allowing to maximize the competition, and he offers to provide an immediate transition to a more competitive procurement methods.
Read the full article
Keywords: Identification of suppliers (contractors, executors), public order, public procurement, efficiency, competition, contract system in the sphere of procurement, auction.