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Measuring the Effects of Bid-Rigging on Prices with Binary Misclassification

Author

Listed:
  • Seoyun Hong

    (Boston University)

  • Chang Sik Kim

    (Sungkyunkwan University)

  • Hyunchul Kim

    (Sungkyunkwan University)

Abstract

The binary indicator of collusion is the key ingredient in estimating overcharges from bid-rigging with a regression-based approach. We develop a method for examining the effects of misclassification error in the indicator of bid-rigging status on estimates of damages from collusion. We derive partial identification of the regression model of winning bids in public procurement auctions and provide informative bounds on the price effects of bid-rigging. We find that the bounds are tight when placing a plausible restriction on the extent of measurement errors. Our findings show that relaxing the nondifferential assumption about misclassification errors leads to wider bounds.

Suggested Citation

  • Seoyun Hong & Chang Sik Kim & Hyunchul Kim, 2022. "Measuring the Effects of Bid-Rigging on Prices with Binary Misclassification," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(3), pages 319-339, November.
    • Handle: RePEc:kap:revind:v:61:y:2022:i:3:d:10.1007_s11151-022-09876-9
    DOI: 10.1007/s11151-022-09876-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Bid-rigging; Overcharges; Binary regressors; Misclassification error; Partial identification;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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