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Corruption And Competition In Public Market Auctions

Author

Listed:
  • Verdier, Thierry
  • Compte, Olivier
  • Lambert-Mogiliansky, Ariane

Abstract

This paper investigates the effect of corruption on competition in government procurement auctions. Our assumption is that the bureaucrat (i.e. the agent that administers the market), if corrupt, may provide a favour in exchange for a bribe. The favour we consider in most of our analysis is the opportunity to readjust a bid. We show that a key effect of corruption is to facilitate collusion in price between firms. This can result in high public spending and inefficient allocation. We discuss the effect of other forms of bureaucratic discretion in the procurement process and analyse conditions under which unilateral anti-corruption controls may restore price competition.

Suggested Citation

  • Verdier, Thierry & Compte, Olivier & Lambert-Mogiliansky, Ariane, 2000. "Corruption And Competition In Public Market Auctions," CEPR Discussion Papers 2434, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2434
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    Citations

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    Cited by:

    1. Þevket Alper Koç, 2008. "Effects Of Asymmetry On Ex Ante Corruption At Auctions," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 22(1+2), pages 17-33.
    2. Daniel Kaufmann & Pedro C. Vicente, 2011. "Legal Corruption," Economics and Politics, Wiley Blackwell, vol. 23(2), pages 195-219, July.
    3. Lee, Joon-Suk, 2008. "Favoritism in asymmetric procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1407-1424, November.

    More about this item

    Keywords

    Auction procedures; Collusion; Controls; Corruption;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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