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Procurement auctions under quality manipulation corruption

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  • Huang, Yangguang
  • Xia, Jijun

Abstract

In procurement, quality manipulation corruption arises when the agent tasked with quality evaluation exaggerates the quality of a corrupt firm. If an inefficient firm is favored by the agent, the buyer can adjust the procurement mechanism such that the corruption rent of the inefficient firm erodes the technological rent of the efficient firm; however, doing so may require procuring the project at an undesirable quality level. To resolve this trade-off between corruption deterrence and quality distortion, unlike standard results in the literature, the buyer may overstate her preference for quality, and the dominance of scoring auctions over minimum-quality auctions disappears.

Suggested Citation

  • Huang, Yangguang & Xia, Jijun, 2019. "Procurement auctions under quality manipulation corruption," European Economic Review, Elsevier, vol. 111(C), pages 380-399.
    • Handle: RePEc:eee:eecrev:v:111:y:2019:i:c:p:380-399
    DOI: 10.1016/j.euroecorev.2018.11.001
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    Cited by:

    1. Huang, Yangguang, 2019. "An empirical study of scoring auctions and quality manipulation corruption," European Economic Review, Elsevier, vol. 120(C).
    2. Yuanzhu Lu & Xundong Yin & Hu Zhang, 2023. "Does surround‐bidding corruption hurt procurers?," Manchester School, University of Manchester, vol. 91(4), pages 320-335, July.
    3. Chandel, Shivangi & Sarkar, Shubhro, 2023. "Corruption in multidimensional procurement auctions under asymmetry," Economic Modelling, Elsevier, vol. 120(C).
    4. Peng Hao & Jun-Peng Guo & Eoghan O’Neill & Yong-Heng Shi, 2023. "When Will First-Price Work Well? The Impact of Anti-Corruption Rules on Photovoltaic Power Generation Procurement Auctions," Sustainability, MDPI, vol. 15(4), pages 1-24, February.
    5. Zhe Chen, 2021. "The bid orchestration and competitions in scoring procurement auctions," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(7), pages 1718-1729, October.
    6. Wang, Hong, 2020. "Quality manipulation and limit corruption in competitive procurement," European Journal of Operational Research, Elsevier, vol. 283(3), pages 1124-1135.
    7. Valentina Kravchenko & Tatiana Kudryavtseva & Yuriy Kuporov, 2021. "A Method for Assessing Threats to the Economic Security of a Region: A Case Study of Public Procurement in Russia," Risks, MDPI, vol. 9(1), pages 1-10, January.

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    More about this item

    Keywords

    Scoring auction; Quality manipulation; Corruption; Procurement;
    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
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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