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Corruption and Collusion in Procurement Tenders

Author

Listed:
  • Ariane Lambert-Mogiliansky

    (CERAS Ecole Nationale des Ponts Chaussee, CNRS URA 2036 and New Economic School)

  • Konstantin Sonin

    (New Economic School/CEFIR and CEPR)

Abstract
There is a mounting body of evidence that collusive agreements between bidders in large multiple-object procurement tenders are often supported by a corrupt administrator. In a first-price multiple-object auction, if the auctioneer has some legal discretion to allow bidders to readjust their offers prior to the official opening, he also has incentives to extract bribes from agents in exchange for abusing this discretion. In particular, corrupt agent’s incentives to receive bribes are closely linked with that of creating a ’bidding ring’ as the agent’s discretionary power gains value when firms collude. Thus, corruption generates focal equilibria where bidders fully refrain from competing with each other. Additional flexibility of the auction format such as the possibility to submit package bids, which is often considered to be efficiency-enhancing in theoretical literature, increases the risk of collusion in the presence of corruption. Such problems are more likely to arise in tenders, where participating firms are not too close competitors.

Suggested Citation

  • Ariane Lambert-Mogiliansky & Konstantin Sonin, 2003. "Corruption and Collusion in Procurement Tenders," Working Papers w0036, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0036
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    File URL: https://www.nes.ru/files/Preprints-resh/WP36.pdf
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    Citations

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    Cited by:

    1. Balsevich, A. & Pivovarova, S. & Podkolzina, E., 2012. "The Role of Information Transparency in Public Procurement: the Example of Russian Regions," Journal of the New Economic Association, New Economic Association, vol. 15(3), pages 82-112.
    2. Tina Søreide, 2008. "Beaten by Bribery: Why Not Blow the Whistle?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(3), pages 407-428, September.
    3. Leonardo Rezende, 2009. "Biased procurement auctions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 38(1), pages 169-185, January.
    4. Michael Dietrich & Jolian McHardy & Abhijit Sharma, 2016. "Firm Corruption in the Presence of an Auditor," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 8(2), pages 97-124, December.
    5. Sonin Konstantin, 2004. "Private interest in public tenders: no revenue, no efficiency and no social benefits," EERC Working Paper Series 00-111e, EERC Research Network, Russia and CIS.
    6. Kenny, Charles & Soreide, Tina, 2008. "Grand Corruption in Utilities," Policy Research Working Paper Series 4805, The World Bank.
    7. Frédéric Boehm & Juanita Olaya, 2006. "Corruption In Public Contracting Auctions: The Role Of Transparency In Bidding Processes," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(4), pages 431-452, December.
    8. repec:hal:wpaper:hal-00512813 is not listed on IDEAS
    9. Anna Balsevich & Svetlana Pivovarova & Elena Podkolzina, 2011. "Information Transparency in Public Procurement: How it Works in Russian Regions," HSE Working papers WP BRP 01/EC/2011, National Research University Higher School of Economics.

    More about this item

    Keywords

    auctions; corruption; collusion;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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