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Auctions and Corruption

Author

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  • Yvan Lengwiler
  • Elmar G. Wolfstetter

Abstract

In many auctions, the auctioneer is an agent of the seller. This delegation invites corruption. In this paper we propose a model of corruption, examine how corruption affects the auction game, how the anticipation of corruption affects bidding, and how it altogether changes the revenue ranking of typical auctions. In addition we characterize incentive schemes that may prevent corruption, and compare them to the fee schedules employed by major auction houses.

Suggested Citation

  • Yvan Lengwiler & Elmar G. Wolfstetter, 2000. "Auctions and Corruption," CESifo Working Paper Series 401, CESifo.
  • Handle: RePEc:ces:ceswps:_401
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    References listed on IDEAS

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    1. Benny Moldovanu & Manfred Tietzel, 1998. "Goethe's Second-Price Auction," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 854-859, August.
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      • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
    3. Wolfstetter,Elmar, 2000. "Topics in Microeconomics," Cambridge Books, Cambridge University Press, number 9780521645348, January.
    4. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
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    6. Graham, Daniel A & Marshall, Robert C, 1987. "Collusive Bidder Behavior at Single-Object Second-Price and English Auctions," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1217-1239, December.
    7. Engelbrecht-Wiggans Richard, 1994. "Auctions with Price-Proportional Benefits to Bidders," Games and Economic Behavior, Elsevier, vol. 6(3), pages 339-346, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Susanne Büchner & Andreas Freytag & Luis González & Werner Güth, 2008. "Bribery and public procurement: an experimental study," Public Choice, Springer, vol. 137(1), pages 103-117, October.
    2. Arozamena, Leandro & Weinschelbaum, Federico, 2009. "The effect of corruption on bidding behavior in first-price auctions," European Economic Review, Elsevier, vol. 53(6), pages 645-657, August.
    3. McAdams, David & Schwarz, Michael, 2007. "Who pays when auction rules are bent?," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 1144-1157, October.
    4. Jan Pavel & Emilia Sičáková-Beblavá, 2013. "Do E-Auctions Realy Improve the Efficiency of Public Procurement? The Case of the Slovak Municipalities," Prague Economic Papers, Prague University of Economics and Business, vol. 2013(1), pages 111-124.
    5. Xiaoshuai Fan & Ying‐Ju Chen & Christopher S. Tang, 2021. "To Bribe or Not in a Procurement Auction under Disparate Corruption Pressure," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1220-1245, May.
    6. William H. Melody & Wolter Lemstra, 2011. "Liberalization in Radio Spectrum Management," Chapters, in: Matthias Finger & Rolf W. Künneke (ed.), International Handbook of Network Industries, chapter 8, Edward Elgar Publishing.
    7. Þevket Alper Koç, 2008. "Effects Of Asymmetry On Ex Ante Corruption At Auctions," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 22(1+2), pages 17-33.
    8. Koc, Sevket Alper & Neilson, William S., 2008. "Interim bribery in auctions," Economics Letters, Elsevier, vol. 99(2), pages 238-241, May.
    9. Shinya Horie, 2017. "Procurement Auctions with Uncertainty in Corruption," Discussion Papers 1710, Graduate School of Economics, Kobe University.
    10. Claudio Weber Abramo, 2003. "Prevention and detection in bribery-affected public procurement," Public Economics 0309001, University Library of Munich, Germany.
    11. Huang, He & Li, Zhipeng, 2015. "Procurement auctions with ex-ante endogenous bribery," Economic Modelling, Elsevier, vol. 47(C), pages 111-117.

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    More about this item

    Keywords

    Auctions; procurement; corruption; collusion; coalitions;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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