Competi tion under Financial Constraints in Procurement Markets
Ab stract:
Financial constraints raise firms ' effective costs, often asymmetrically, with consequences for competition and market structure. We study these effects in public procurement, where p ayment delays force suppliers to finance the gap between production and pay ment. We combine administrative data on the full contract life-cycle with a reform that sharply reduced payment delays in Chilean public health procur ement. Difference-in-differences estimates show that shorter delays increas e auction participation --especially among small firms-- and lower winning bids by 5 percent. To separate financing costs from competition effects, we estimate a model of entry and bidding in scoring auctions in which delays act as a contract-specific cost wedge. We recover a monthly cost of liquidi ty of 0.9 percent (11 percent annualized), higher for small firms. Financin g costs account for roughly 8 percent of the small–large cost gap, implying payment terms are a policy lever over cost asymmetries and competition.
DTSTAMP:20261023T161248Z DTSTART:20260918T130000Z DTEND:20260918T140000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR