This paper investigates joint bidding when firms have incentives to sign subcontracts with each other after competing in the bidding stage. A bidding consortium affects the horizontal subcontracting market and, through backward induction, alters firms’ bids. Our findings challenge the current legal practice that consortia without efficiencies must pass the “no-solo-bidding test”, requiring that its members could not bid stand-alone. Our framework predicts that the formation of a temporary consortium, which has the feature that it dissolves after submitting a losing bid, benefits the procurer. The winning bid is more competitive with a temporary as compared to a structural consortium.
- 511 Economics
- Joint bidding
- Horizontal subcontracting
- Buyer power
Areas of Strength and Areas of High Potential (AoS and AoHP)
- AoS: Competition economics and service strategy - Quantitative consumer behaviour and competition economics