Exponential and power laws in public procurement markets

Ladislav Kristoufek, Jiri Skuhrovec

Abstract: We analyse for the first time a unique public procurement database, which includes information about a number of bidders for a contract, a final price, an identification of a winner and an identification of a contracting authority for each of more than 40000 public procurements in the Czech Republic between 2006 and 2011, focusing on the distributional properties of the variables of interest. We uncover several scaling laws —the exponential law for the number of bidders, and the power laws for the total revenues and total spendings of the participating companies, which even follows Zipf’s law for the 100 most spending institutions. We propose an analogy between extensive and non-extensive systems in physics and the public procurement market situations. Through an entropy maximization, such analogy yields some interesting results and policy implications with respect to the Maxwell-Boltzmann and Pareto distributions in the analysed quantities.

Kristoufek, L., Skuhrovec, J. (2012). Exponential and power laws in public procurement markets. EPL (Europhysics Letters) 99, art. 28005

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