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Auctions and Corruption

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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.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2000/wp-cesifo-2000-12/cesifo_wp401.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 401.

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Date of creation: 2000
Date of revision:
Handle: RePEc:ces:ceswps:_401

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Related research

Keywords: Auctions; procurement; corruption; collusion; coalitions;

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References

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  1. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
  2. 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 1217-39, December.
  3. Fisher,Franklin M., 1999. "Microeconomics," Cambridge Books, Cambridge University Press, number 9780521624237, November.
  4. Engelbrecht-Wiggans Richard, 1994. "Auctions with Price-Proportional Benefits to Bidders," Games and Economic Behavior, Elsevier, vol. 6(3), pages 339-346, May.
  5. McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  6. Wolfstetter,Elmar, 2000. "Topics in Microeconomics," Cambridge Books, Cambridge University Press, number 9780521645348, November.
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Cited by:
  1. 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, University of Economics, Prague, vol. 2013(1), pages 111-124.
  2. Federico Weinschelbaum & Leandro Arozamena, 2005. "The Effect of Corruption on Bidding Behavior in First-Price Auctions," Working Papers 82, Universidad de San Andres, Departamento de Economia, revised Aug 2005.
  3. Claudio Weber Abramo, 2003. "Prevention and detection in bribery-affected public procurement," Public Economics 0309001, EconWPA.
  4. Susanne Büchner & Andreas Freytag & Luis G. Gonzalez & Werner Güth, 2006. "Bribery and Public Procurement - An Experimental Study -," Papers on Strategic Interaction 2005-30, Max Planck Institute of Economics, Strategic Interaction Group.
  5. Þevket Alper Koç, 2008. "Effects Of Asymmetry On Ex Ante Corruption At Auctions," Bogazici Journal of Economics and Administrative Sciences, Bogazici University, Department of Economics, vol. 22(1+2), pages 17-33.
  6. 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.

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