How governments promote monopolies: Public procurement in India

Goyal, Yugank (2019) How governments promote monopolies: Public procurement in India. American Journal of Economics and Sociology, 78 (5). pp. 1135-1169. ISSN 00029246

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Government officials exert tremendous power when they buy goods and services from private companies. By setting the terms and conditions under which public procurement takes place, public officials help determine which companies will thrive and which ones will fail. This is one of the important ways governments help create and sustain monopolies in the private sector. But since the bidding process to sell products or services to the government is supposed to be an open and fair competition, how does it become skewed toward businesses that already dominate markets? We examine a particular source of bias: the eligibility criteria for bidding in public procurement tenders. These criteria often allow a few large, private companies to bid on government contracts, but they exclude a large number of small and medium-sized enterprises. We study the terms by which offers are solicited in India through tenders floated for transportation projects: roads, highways, bridges, and civil construction. We find that the eligibility criteria impose an unnecessarily heavy burden on small firms, potentially knocking them out of the competition and discouraging them from participating in other procurement processes. In this way, the process reinforces monopolies instead of breaking them up. While this study focuses on India, the results also apply to similar economies.

Item Type: Article
Keywords: Monopoly | Government | Market | Economy
Subjects: Social Sciences and humanities > Business, Management and Accounting > General Management
Social Sciences and humanities > Economics, Econometrics and Finance > Economics
JGU School/Centre: Jindal School of Liberal Arts & Humanities
Depositing User: Shilpi Rana
Date Deposited: 14 Dec 2021 05:20
Last Modified: 28 Dec 2021 05:39
Official URL:
Additional Information: Author thanked for Jatin Talreja, Ankit Sethi, Amrit Raj, George Du, Anand Kumar, Samta Arora, Dwarika Uniyal, Ranjan Ghosh, Arun Kaushik, Girish Yadav, Sukanto Roy, and Anup Kumar to provided valuable insights and acknowledged the excellent research assistance of Ms. Diya Patel.


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