Abstract: This paper contrasts two auction formats often used in public procurement: first price auctions with ex-post screening of bid responsiveness and average bid auctions, in which the bidder closest to the average bid wins. The equilibrium analysis reveals that their ranking is ambiguous in terms of revenues, but the average bid auction is typically less efficient. Using a dataset of Italian public procurement auctions run alternately under the two formats, a structural model of bidding is estimated for the subsample of first price auctions. Counterfactual estimates of the efficiency loss under the average bid auctions show that this mechanism fails to select to lowest bidder in two thirds of the auctions and that the average production cost is one sixth higher than in the first price auctions.

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