Francesco Decarolis

Recent Research

1) Public Procurement Auctions

• "Awarding Price, Contract Performance and Bids Screening: Evidence from Procurement Auctions," ( Web Appendix ) forthcoming at American Economic Journal: Applied Economics
  ABSTRACT: This paper presents evidence on the perverse trade-off that first price auctions induce between low prices at the awarding stage and poor ex post performance when bids are not binding commitments. By exploiting the different timing with which first price auctions were introduced in Italy to procure public works, this study finds that at least half of the cost savings from lower winning prices are lost because of ex post renegotiation. Screening the lowest price bid for its responsiveness prevents performance worsening but also reduces the initial cost savings by a third and induces delays in awarding the contract.
• "Detecting Bidders Groups in Collusive Auctions" (2013, Paper , Web Appendix ) with Timothy Conley
  ABSTRACT: This paper studies entry and bidding in procurement auctions were contracts are awarded to the bid closest to a trimmed average bid. We characterize equilibrium under competition and show that it is weak due to strong incentives for cooperation. We present statistical tests motivated by a model of coalition entry and bidding. We show that our tests perform well in a validation dataset with known cartels. We also use them to investigate cooperation in a larger dataset where cartels are suspected but not known. We detect several suspiciously cooperative groups with potentially substantial, positive effects upon auctioneers revenues.
• "When the Highest Bidder Loses the Auction: Theory and Evidence from Public Procurement" (Revised version to be posted soon)
  Mid-revision draft (2010) using old data available here.
  Older version (2009) published as Bank of Italy Working Paper 717 available here.
  ABSTRACT: This paper analyzes two methods used in public procurement auctions to deal with the risk of bidder default: first price auctions with ex-post screening of bid responsiveness and average bid auctions in which the bidder closest to the average bid wins. It is shown that when both defaults and screening are sufficiently costly auctioneer prefer average bid auctions. The effect of the two auction formats on revenues and efficiency is empirically studied by estimating a structural model of firms costs distributions using a new dataset of Italian public procurement auctions, run alternately using first price auctions with screening or a form of average bid auctions.
  

Associated Policy Papers

· "Too Good to Be True Auctions" (2011, paper)
A short note summarizing the two main policy prescriptions coming from the two research papers above: never use Average Bid Auctions, but be wise when using First Price Auctions.
Joint with Michael Klein World Bank - PPIAF Note. Entry of the "Body of Knowledge on Infrastructure Regulation".

· "The Awarding of Public Works in Italy: An Analysis of the Mechanisms for the Selection of the Contractors" (2010, paper)
Bridges the economic and legal analysis of the system of public procurement in Italy.
Joint with Cristina Giorgiantonio (Bank of Italy) and Valentina Giovanniello (Court of Justice, Rome). Published in Mercato Concorrenza e Regole XIII, 2, August 2011. Italian media coverage: 1 and 2.

· "The Renegotiation of Public Contracts" (2011, English version forthcoming)
An extensive empirical exploration of the causes of renogotiation of public contracts.
Joint with Giuliana Palumbo (Bank of Italy). Italian version published in "Le Infrastrutture in Italia," Bank of Italy, 2011.

2) Health Care Markets

• "Pricing and Incentives in Publicly Subsidized Health Care Markets: The Case of Medicare Part D"TO BE POSTED SOON
  Work in progress supported by the Sloan Foundation grant #2011-5-23-ECON ($45,000).

3) Sponsored Search Auctions

• "Bidders Coordination in Sponsored Search Auctions"
  Work in progress with Maris Goldmanis and Antonio Penta.

Older Research

• "Economic Effects of Democracy. An Empirical Analysis," Rivista di Politica Economica, 2003, Nov-Dic, pp. 69 - 116.
  ABSTRACT: This research analyses through the use of instrumental variables estimation whether democracy has an effect on variables belonging to three different categories: fiscal policy, inequality in income distribution and political instability. It shows there is no stable relation between democracy and fiscal policy variables between countries of the sample in the 1978-1988 period. Democracy, on the other hand, significantly affects the difference in middle class income share (positively) and in changes at the top of the executive (negatively).
  Winning paper: Young Economist Award, 2004. Attributed by the European Economic Association.
  Winning Paper: Angelo Costa Award, 2003. Attributed by the Rivista di Politica Economica to the best Italian BA theses in Economics, 1' classified.
  
  
• "Homotopy Continuation Methods: An Algorithm for the Fixed Point and Newton Homotopy Methods with Some Examples" (2005, with Ricardo Mayer and Martin Santamaria)
  ABSTRACT: Homotopy Continuation Methods provide a useful approach to find the zeros of functions mapping from Rn to Rn in a globally convergent way. Homotopy Methods transform a hard problem into a simpler one whit easily calculated zeros and then gradually deform this simpler problem into the original one computing the zeros of the intervening problems and eventually ending with a zero of the original problem. This paper presents a description of a Matlab code that can implement the Fixed Point Homotopy and the Newton Homotopy methods to find the zeros of any function mapping from Rn to Rn. Four examples are also provided for illustrative purposes. Two univariate examples, one of which regarding a General Equilibrium problem, and two multivariate ones show how the Matlab code can be easily applied to different problems. You will need Matlab's Symbolic Math Toolbox to run this code.
  Download only the H-topy Matlab code here or download a zipped folder containing also the codes for all the examples here.

Publications in Italian Law Journals and Books

• "Cronaca di un fallimento annunciato: limpiego dellesclusione automatica negli appalti di lavori pubblici" (2011, paper)
  The legal origin and the economic consequences of almost 15 years of usage of Average Bid Auctions in Italy.
  Published in Giornale di Diritto Amministrativo, Nov, 2011, pp 1246-1251.
• "Appalti Pubblici e Federalismo: Riparto di Competenze e Vincoli Comunitari nell'Affidamento dei Lavori Pubblici in Italia" (2011, paper)
  An analysis of the successes and failures of several local reforms of the public procurement system.
  Joint with Cristina Giorgiantonio (Bank of Italy) and forthcoming in "Rapporto sulla Finanza Pubblica", Fondazione Rosselli, edited by Francesca Traclr and Marco Nicolai.

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