Cross-Border Procurement in the European Union and Beyond: A Game Theoretic Framework

In recent years the EU has been concerned about third countries reciprocating access, in their own domestic Public Procurement Markets (PPM), to EU firms as much as Europe does to third countries’ companies. Reaching a consensus on how to behave with third countries firms was a difficult and time taking process in EU. This paper aims to contribute to understand the difficulties of reciprocation in opening PPM. Within a stylised game theoretic framework, the main message of the paper suggests that open PPM may be more likely under two main conditions. When in the countries’ negotiations the perspective of contracting authorities prevails or, when the business firms’ perspective prevails, however as long as negotiators can reliably estimate and explicitly take into account the companies’ costs for executing contracts. Because of the model assumptions and limitations, the above findings can only be interpreted as examples rather than general conclusions.