Buyer's Experience and Corruption: Evidence from Public Procurement in Russia
Abstract: Can experienced buyers achieve better outcomes? In this paper, we address this question by studying the ability of public organizations to arrange competitive procurement with proper contract execution. We argue that higher experience enables public buyers to set adequate contract terms and requirements, so they can attract ‘good’ suppliers and probability to execute the contract on time increases. We introduce a dynamic measure of relevant experience by estimating for each auction the number of successfully closed contracts of the buyer within the same interval of the reserve prices. Using data on the population of road construction contracts in Russia, concluded by public buyers of federal, regional and municipal level, we show that relevant experience increases the probability to execute contract on time, but it decreases the competition and this effect is stronger for the regions with higher perception of corruption.