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Corruption And Competition In Public Market Auctions

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  • Compte, Olivier
  • Lambert-Mogiliansky, Ariane
  • Verdier, Thierry

Abstract

This paper investigates the effect of corruption on competition in government procurement auctions. Our assumption is that the bureaucrat (i.e. the agent that administers the market), if corrupt, may provide a favour in exchange for a bribe. The favour we consider in most of our analysis is the opportunity to readjust a bid. We show that a key effect of corruption is to facilitate collusion in price between firms. This can result in high public spending and inefficient allocation. We discuss the effect of other forms of bureaucratic discretion in the procurement process and analyse conditions under which unilateral anti-corruption controls may restore price competition.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2434.

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Date of creation: Apr 2000
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Handle: RePEc:cpr:ceprdp:2434

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Related research

Keywords: Auction Procedures; Collusion; Controls; Corruption;

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Cited by:
  1. Lee, Joon-Suk, 2008. "Favoritism in asymmetric procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1407-1424, November.
  2. Daniel Kaufmann & Pedro C. Vicente, 2011. "Legal Corruption," Economics and Politics, Wiley Blackwell, vol. 23(2), pages 195-219, 07.
  3. 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.

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