The Spatial Structure of Competitive Interactions: Evidence From Public Procurement Networks in Quebec

How can functional procurement markets be delineated from observed bidding behavior? Using bid-level data from Quebec’s municipal paving sector (2012–2019), we construct a geographical bidder overlap (GBO) index measuring supply-side substitutability between postal codes. Gravity-style regressions show that GBO decays with distance and increases with location similarity. Community detection on the GBO network identifies 28 functional market areas that diverge substantially from administrative boundaries. Exponential Random Graph models indicate that triadic closure, geographic proximity, and demand similarity are each associated with greater functional market overlap. These functional market areas suggest that standard regional units are imperfect proxies for competitive geography in this sector.