Bribery and Favoritism by Auctioneers in Sealed Bid Auctions
AbstractWe consider a model of bribery and favoritism in a sealed-bid first-price procurement auction. The auctioneer can award the contract to a dishonest supplier at the low bid of an honest supplier. We examine the equilibrium bidding functions of both suppliers when it is common knowledge that the dishonest supplier can bribe the auctioneer. Both efficient and inefficient bribes can arise and the resulting allocative distortion differs from the distortions in a first-price auction or an optimal auction. The expected price paid by the buyer is generally higher with bribery, but when efficient bribes occur, there can be cases in which bribery results in a lower expected price. We also examine the incentives for cost-reducing investment by the suppliers and find that bribery results in a lower industry capacity than the social optimum. Finally, we examine upfront bribes in which the suppliers compete to be favored by the auctioneer and find that the stronger supplier will pay a larger bribe than the weaker supplier.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1827.
Date of creation: 01 Aug 2000
Date of revision:
Contact details of provider:
Phone: 1 212 998 3820
Fax: 1 212 995 4487
Web page: http://www.econometricsociety.org/pastmeetings.asp
More information through EDIRC
Other versions of this item:
- Burguet Roberto & Perry Martin K, 2007. "Bribery and Favoritism by Auctioneers in Sealed-Bid Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 7(1), pages 1-27, June.
- Roberto Burguet & Martin Perry, 2002. "Bribery and Favoritism by Auctioneers in Sealed Bid Auctions," Departmental Working Papers 200205, Rutgers University, Department of Economics.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Waehrer, Keith & Perry, Martin K, 2003.
" The Effects of Mergers in Open-Auction Markets,"
RAND Journal of Economics,
The RAND Corporation, vol. 34(2), pages 287-304, Summer.
- Waehrer, Keith, 1999. "Asymmetric private values auctions with application to joint bidding and mergers," International Journal of Industrial Organization, Elsevier, vol. 17(3), pages 437-452, April.
- McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.