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AN-009: SME-winner share and extensions

Intuition (plain-language)

Letting cheaper non-SMEs bid means SMEs win less often — the composition cost of open competition. It shows up equally in direct- and indirect-administration buyers, so the channel is institutionally uniform rather than driven by one type of buyer behaving differently.

Reduced-form motivation layer

The numbers below are from the v1–v4 reduced-form DiDiR pipeline (scripts/02_analysis.R + companions), which the v8 manuscript carries as motivation in §1 but does not headline. The canonical v8 result is the structural counterfactual decomposition — see AN-010 (decomposition) and AN-011 (welfare arithmetic).

Question

Under open competition (pre-period in switched group 65), what fraction of winning firms are SMEs? Does the open-vs-SME-only difference in SME winner share vary across PBU types?

Design

  • Sample: completed items in BEC parquet cache, 18-month window.
  • Variation: DiDiR with SME-winner indicator as outcome; heterogeneity cross-cut by pbu_class (direct administration vs indirect administration).
  • Specification: linear probability model with item FE; item-clustered SE; PBU-type interaction in the second specification.
  • Outcomes: probability winner is SME.

Results

The probability that the winning firm is an SME decreases under open tenders, directly supporting the competition mechanism: open tenders attract larger non-SME firms that outbid SMEs on price (see docs/extensions.md and output/tables/tab_sme_winner.tex). Interacting the treatment indicator with a direct-administration dummy reveals broadly similar effects across buyer types (output/tables/tab_heterog_pbu.tex), suggesting the competition channel operates consistently across the institutional landscape.

Output: output/tables/tab_sme_winner.tex, output/tables/tab_heterog_pbu.tex.

Interpretation

The SME-winner share decline is the direct counterpart of the Gelbach composition channel in AN-008. The symmetry across PBU types says the composition shift itself is not driven by institutional-buyer heterogeneity — it tracks the type-conditional cost gradient that the structural decomposition in AN-010 builds on.

Reading: the composition shift is real and pervasive; it is not a buyer-specific artifact. This strengthens the interpretation that non-SMEs are systematically lower-cost on the price-forming margin, not just lower-cost for sophisticated buyers.

Confidence: yellow. The direction is robust; the magnitude is informative but not as load-bearing as the structural decomposition. The PBU-type symmetry is a useful descriptive cross-cut but is not by itself an identification argument.

Follow-ups

  • Composition-margin Lee bounds (extending the AN-005 trimming logic to the SME-winner indicator) would tighten the composition reading against differential completion across PBU types.
  • Cross-cut by non-SME firm size (RAIS-employment quartile of winners) would test whether the composition shift is concentrated on large non-SMEs or on marginal non-SMEs barely above the SME threshold.
  • Within-PBU repeated-purchase patterns: do specific PBUs shift their SME-winner share more than others within the broad PBU-type classification? This would identify procurement-officer-level heterogeneity.