Snow Removal Auctions in Montreal: Costs, Informational Rents, and Procurement Management

Abstract

Using nonparametric estimation techniques adapted from Guerre et al. [2000], we infer cost distributions and informational rents, from 666 snow removal contracts offered for tender by the City of Montreal. Our results are compatible with standard received theory of competitive auctions: there is a positive correlation between costs and bids; rents increase with the variance of costs and decrease with the number of bidders. Bids and costs have decreased over the sample period, while informational rents remained stable. The City deserves credit for these results, as it has succeeded in exploiting economies of scale while maintaining competition.Procurement auction, nonparametric estimation, informational rents, task design, municipal contracts