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Cartels In Public Procurement

Author

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  • Alberto Heimler

Abstract

Public procurement markets differ from all others because quantities do not adjust with prices but are fixed by the bidding authority. As a result, there is a high incentive for organizing cartels (where the price elasticity of demand is zero below the base price) that are quite stable because there are no lasting benefits for cheaters. In such circumstances, leniency programs are unlikely to help discovering cartels. Since all public procurement cartels operate through some form of bid rotation, public procurement officials have all the information necessary to discover them (although they have to collect evidence on a number of bids), contrary to what happens in normal markets where customers are not aware of the existence of a cartel. However, in order to promote reporting, the structure of incentives has to change. For example, the money saved from a cartel should at least, in part, remain with the administration that helped discover it and the reporting official should reap a career benefit. In any case, competition authorities should create a channel of communication with public purchasers so that the public purchasers would know that informing the competition authority on any suspicion at bid rigging is easy and does not require them to provide full proof.

Suggested Citation

  • Alberto Heimler, 2012. "Cartels In Public Procurement," Journal of Competition Law and Economics, Oxford University Press, vol. 8(4), pages 849-862.
  • Handle: RePEc:oup:jcomle:v:8:y:2012:i:4:p:849-862.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhs028
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    Cited by:

    1. Emanuel Wittberg & Mihály Fazekas, 2023. "Firm performance, imperfect competition, and corruption risks in procurement: evidence from Swedish municipalities," Public Choice, Springer, vol. 197(1), pages 227-251, October.

    More about this item

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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