Collusion mechanisms in procurement auctions: An experimental investigation
AbstractCollusive agreements are often observed in procurement auctions. They are probably more easily achieved when competitors’ costs are easily estimated. If, however, the individual costs of bidders are private information, effective ring formation is difficult to realize. We compare experimentally different coordination mechanisms in a first-price procurement auction in how they promote the prospects of collusive arrangements. One mechanism allows bidders to coordinate by means of unrestricted pre-play communication. The second one enables bidders to restrict their bidding range and the last one gives them the opportunity to implement mutual shareholding. According to our results firstprice procurement is quite collusion-proof when allowing for the latter two coordination mechanisms whereas, on average, pre-play communication increases bidders' profits.
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Bibliographic InfoPaper provided by Max Planck Institute of Economics, Strategic Interaction Group in its series Papers on Strategic Interaction with number 2006-14.
Length: 22 pages
Date of creation: Sep 2006
Date of revision:
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-23 (All new papers)
- NEP-COM-2006-09-23 (Industrial Competition)
- NEP-EXP-2006-09-23 (Experimental Economics)
- NEP-FMK-2006-09-23 (Financial Markets)
- NEP-GTH-2006-09-23 (Game Theory)
- NEP-LAW-2006-09-23 (Law & Economics)
- NEP-PBE-2006-09-23 (Public Economics)
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