TILEC Work In Progress: Gyula Seres

We consider a Green Public Procurement setting where the procurer provides a bid discount to environmentally friendly technologies to foster their use. We assume that prior to the auction firms may switch to green technology by a publicly observable costly investment. We show that investment acts as a signaling device. This mitigates the effect of incomplete information on cost-efficiency by reducing bid shading, which results in lower prices for the procurer. Therefore, even a procurer with no preference towards green technology can find it optimal to use a discount. Our results challenge the common perception that Green Public Procurement always implies a trade-off between environmental performance and purchasing price.

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