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Efficiency and bid rigging in simultaneous procurement auctions under oligopoly

Author

Listed:
  • Aaro Hazak
  • Tanel Kerikmäe
  • Evelin Pärn-Lee

Abstract

Splitting of large procurements into several smaller ones has been propagated, for example in the European Union and OECD members, as a way for enhancing competition and improving institutional framework for market efficiency. This paper presents a conceptual argumentation on the causes and consequences of potential bid rigging when simultaneous bids for similar goods are asked from oligopolists. It appears that calling for similar bids simultaneously may incentivise collusion among bidders, while arranging several consecutive procurement auctions could lessen that problem. Moreover, simultaneous procurement auctions may result in a relatively high cost of supply due to the larger risks involved for bidders. Furthermore, bid rigging remains difficult to detect under simultaneous procurement auctions due to a large degree of uncertainty for bidders, which supports relatively high bid prices that may, in fact, be collusive.

Suggested Citation

  • Aaro Hazak & Tanel Kerikmäe & Evelin Pärn-Lee, 2020. "Efficiency and bid rigging in simultaneous procurement auctions under oligopoly," International Journal of Procurement Management, Inderscience Enterprises Ltd, vol. 13(2), pages 199-213.
  • Handle: RePEc:ids:ijpman:v:13:y:2020:i:2:p:199-213
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    Cited by:

    1. Mihail Busu & Cristian Busu, 2021. "Detecting Bid-Rigging in Public Procurement. A Cluster Analysis Approach," Administrative Sciences, MDPI, vol. 11(1), pages 1-14, February.

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