Set-aside auctions and small businesses’ participation in public procurement: an empirical analysis

Applied Economics. 2025. No. 1466-4283 . P. 1–15.

Shagbazian G., Valbonesi P., Tkachenko A., Shadrina E. V.

We investigate the effects of set-aside (SA) auctions supporting small business participation in public procurement, exploiting an original database of e-auctions for Russian granulated sugar (a largely homogeneous good) in the period 2011–2013. This affirmative action programme – as in many others similar and commonly adopted programmes by governments – records confounding effects. On the one hand, SA auctions attract more small business enterprises; on the other hand, SA auctions restrict the entry of possibly more cost-efficient large firms. Our findings highlight that SA auctions, on average, determine lower final prices for the procurer than non-SA (NSA) auctions do, although competition in SA auctions is not higher. We show that these findings depend on the reserve price intervals, supporting the effectiveness of SA auctions for small-scale procurement.

Keywords: procurement, auction, economics of regulation, SME policy