Bid Preference Programs and Participation in Highway Procurement Auctions

Abstract

We use data from highway procurement auctions subject to California's Small Business Preference program to study the effect of bid preferences on auction outcomes. Our analysis is based on an estimated model of firms' bidding and participation decisions, which allows us to evaluate the effects of current and alternative policy designs. We show that incorporating participation responses significantly alters the assessment of preferential treatment policies. (JEL D44, H76, R42)