Bid Rigging – An Analysis of Corruption in Auctions
AbstractIn many auctions, the auctioneer is an agent of the seller. This invites corruption. We propose a model of corruption in which the auctioneer orchestrates bid rigging by inviting a bidder to either lower or raise his bid, whichever is more profitable. We characterize equilibrium bidding in first- and second-price auctions, show how corruption distorts the allocation, and why both the auctioneer and bidders may have a vested interest in maintaining corruption. Bid rigging is initiated by the auctioneer after bids have been submitted in order to minimize illegal contact and to realize the maximum gain from corruption.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1488.
Date of creation: 2005
Date of revision:
auctions; procurement; corruption; right of first refusal; numerical methods;
Other versions of this item:
- Lengwiler, Yvan & Wolfstetter, Elmar G., 2005. "Bid Rigging. An Analysis of Corruption in Auctions," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 39, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-13 (All new papers)
- NEP-COM-2005-08-13 (Industrial Competition)
- NEP-MIC-2005-08-13 (Microeconomics)
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