Buyers' Ability and Discretion in Public Procurement: An Empirical Analysis on Standardised Medical Devices

Using a dataset of medical devices purchased by Italian Public Buyers (PBs), for each purchase, we measure the difference between each item's price and its marginal cost. We define PBs' ability in purchasing as PBs' fixed effect (FE) on that difference. We find that average prices vary substantially amongst PBs, and this variation is largely captured by PBs' FE. We then exploit the exogenous termination of the mandatory reference price regime to assess how discretion affects procurement performance, given each PB's ability. Our results highlight that reduced PBs' discretion - in presence of mandatory prices - determines efficiency gains and losses for low- and high-ability PBs, respectively.