Price offers of pharmaceutical procurement in China: evidence from Guangdong province

Using a sample from the pharmaceutical procurement in Guangdong, China, over the period from 2007-2009 and a data set of comprehensive potential bidders, this article analyzes the determinants of bidding behaviors in the presence of sample selection. Bidding patterns between highly competitive and less competitive groups are also examined. Price differentials are further decomposed to explain factors that account for the gap. We find that a high level of competitiveness and more winning experiences induce manufacturers to behave aggressively and make lower bids. Moreover, bidders in a less competitive group are less sensitive to the number of potential bidders and the experience of past wins. The decomposition results indicate that the characteristics of bidders are not the main driver for the large price differentials between those groups.