We study the effects of the recent economic crisis on firms׳ bidding behavior and markups in sealed bid auctions. Using data
from Austrian construction procurements, we estimate bidders׳ construction costs within a private value auction model. We
find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning
bids decrease by 3.3 percentage points. We also find that without the government stimulus package this decrease would have
been larger. These two pieces of evidence point to pro-cyclical markups.
Keywords:Construction procurement, First-price auctions, Private values, Economic crisis, Government stimulus
Research group:Labour Economics, Income and Social Security
