A law of large numbers:: Bidding and compulsory competitive tendering for refuse collection contracts

In this paper we investigate the relationship between costs and number of bidders for U.K. local authorities' refuse collection contracts. We find that a higher number of bids is associated with a lower cost of service. This finding, as well as being an important empirical verification of standard proposition in auction theory, has important policy implications. The U.K. Labour government elected in 1997 has abolished Compulsory Competitive Tendering (CCT). Our findings indicate that this would increase local authorities' expenditure in refuse collection.