Application Period in Reverse Auctions

Abstract: The duration to apply for participation in auctions affects entry costs through search costs and the time to prepare applications. The role and the determinants of the application period is studied using Russian public procurement data on gasoline in the period 2011-2013. By relying on explicit rules on the determination of the application period, we find that longer periods increase competition and eventually lead to price reductions. Moreover, we show that public buyers avoid long application periods. They shorten the period if they need gasoline immediately but we further argue that buyers limit competition by increasing entry costs to facilitate favoritism. Finally, we provide evidence of collusion sustaining favoritism.