Bid Rigging and the Threat of Government Prosecution

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Bid Rigging and the Threat of Government Prosecution

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Chantale LaCasse

Abstract

In this article, I develop a simple bidding model in which collusion is endogenous. Buyers at a first-price sealed-bid auction decide whether to rig their bids given that they face the threat of government prosecution. A legal authority chooses whether to investigate the buyers on the basis of the bids tendered. In the unique sequential equilibrium of the game, buyers rig their bids with positive probability, but the legal authority can never ascertain, on the basis of the bids alone, that a conspiracy has formed.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 26 (1995)
Issue (Month): 3 (Autumn)
Pages: 398-417
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Handle: RePEc:rje:randje:v:26:y:1995:i:autumn:p:398-417

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Maarten C.W. Janssen & Eric Rasmusen, 1998. "Bertrand Competition under Uncertainty," Tinbergen Institute Discussion Papers 98-083/1, Tinbergen Institute. [Downloadable!]
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- Maarten Janssen & Eric Rasmusen, 2000. "Bertrand Competition Under Uncertainty," Econometric Society World Congress 2000 Contributed Papers 1309, Econometric Society. [Downloadable!]
- Eric Rasmusen, 1996. "Bertrand Competition Under Uncertainty," Industrial Organization 9607002, EconWPA. [Downloadable!]
- Janssen, Maarten & Rasmusen, Eric, 2002. "Bertrand Competition under Uncertainty," Journal of Industrial Economics, Blackwell Publishing, vol. 50(1), pages 11-21, March. [Downloadable!] (restricted)
John Raftery, 1999. "Quasi-rational behaviour in the property and construction market," Construction Management & Economics, Taylor and Francis Journals, vol. 17(1), pages 21-27, January. [Downloadable!] (restricted)
Joseph E Harrington, 2001. "Optimal Cartel Pricing in the Presence of an Antitrust Authority," Economics Working Paper Archive 460, The Johns Hopkins University,Department of Economics, revised Jul 2002. [Downloadable!]
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- Joseph E. Harrington, 2005. "Optimal Cartel Pricing In The Presence Of An Antitrust Authority," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 145-169, 02. [Downloadable!] (restricted)
Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics. [Downloadable!]
Joseph E Harrington Jr & Joe Chen, 2002. "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection," Economics Working Paper Archive 514, The Johns Hopkins University,Department of Economics, revised Sep 2004. [Downloadable!]
Other versions:
- Joseph E. Harrington, Jr. & Joe Chen, 2005. "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection," CIRJE F-Series CIRJE-F-359, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
- Harrington, Joseph Jr. & Chen, Joe, 2006. "Cartel pricing dynamics with cost variability and endogenous buyer detection," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1185-1212, November. [Downloadable!] (restricted)
Joseph E Harrington Jr, 2002. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Economics Working Paper Archive 487, The Johns Hopkins University,Department of Economics, revised May 2003. [Downloadable!]
Other versions:
- Joseph E. Harrington, Jr., 2003. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Computing in Economics and Finance 2003 26, Society for Computational Economics.
- Joseph E. Harrington, Jr., 2004. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 651-673, Winter.

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