Abstract

We analyse bidding groups that participate in procurement auctions, and ask what would have happened in the absence of the joint bid in terms of number of bidders and outcome. This counterfactual is of utmost importance in competition policy determining the competitive effects of joint bidding. With data from the Austrian construction sector, we estimate models of first price sealed bid auctions with endogenous entry. Based on the estimated bidding distributions and bidders’ entry behavior, we run counterfactual simulations. The auctioneer would not benefit from dissolving bidding groups, since, although participation decreases only slightly, winning bids would increase by about two percent. When bidding groups are forbidden or only small firms are allowed to form bidding groups, then fewer large firms take part in public procurement auctions and other firms, less efficient firms, enter in the bidding process.