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A Law of Large Numbers: Bidding and Compulsory Competitive Tendering for Refuse Collection Contracts

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Abstract

In this paper we investigate the relationship betweencosts and number of bidders for U.K. local authorities'refuse collection contracts. We find that a highernumber of bids is associated with a lower cost ofservice. This finding, as well as being an importantempirical verification of standard proposition inauction theory, has important policy implications. TheU.K. Labour government elected in 1997 has abolishedCompulsory Competitive Tendering (CCT). Our findingsindicate that this would increase local authorities'expenditure in refuse collection.

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Authors and Affiliations

  1. Department of Economics, University of Chile, Diagonal Paraguay 257, Torre 26, Casilla 3861, Correo Central, Santiago, Chile

    AndréS GóMez-Lobo

  2. Imperial College Management School, 53 Prince's Gate, Exhibition Road, London, SW7 2PG, U.K.

    Stefan Szymanski

Authors
  1. AndréS GóMez-Lobo
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  2. Stefan Szymanski
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GóMez-Lobo, A., Szymanski, S. A Law of Large Numbers: Bidding and Compulsory Competitive Tendering for Refuse Collection Contracts. Review of Industrial Organization 18, 105–113 (2001). https://doi.org/10.1023/A:1026545306923

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