Joint bidding and horizontal subcontracting

This paper investigates joint bidding when firms have incentives to sign subcontracts with each other after competing in the stage. A consortium affects horizontal subcontracting market and, through backward induction, alters firms’ bids. Our findings challenge current legal practice that consortia without efficiencies must pass “no-solo-bidding test”, requiring its members could not bid stand-alone. framework predicts formation of a temporary consortium, which has feature it dissolves submitting losing bid, benefits procurer. The winning is more competitive as compared structural consortium.