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Econometric tests to detect bid-rigging cartels: does it work?

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  • Imhof, David

Abstract

This paper tests how well the method proposed by Bajari and Ye (2003) performs to detect bidrigging cartels. In the case investigated in this paper, the bid-rigging cartel rigged all contracts during the collusive period, and all firms participated to the bid-rigging cartel. The two econometric tests constructed by Bajari and Ye (2003) produce a high number of false negative results: the tests do not reject the null hypothesis of competition, although they should have rejected it. A robustness analysis replicates the econometric tests on two different sub-samples, composed solely by cover bids. On the first sub-sample, both tests produce again a high number of false negative results. However, on the second sub-sample, one test performs better to detect the bidrigging cartel. The paper interprets these results, discusses alternative methods, and concludes with recommendations for competition agencies.

Suggested Citation

  • Imhof, David, 2017. "Econometric tests to detect bid-rigging cartels: does it work?," FSES Working Papers 483, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    • Handle: RePEc:fri:fribow:fribow00483
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Imhof, David & Wallimann, Hannes, 2021. "Detecting bid-rigging coalitions in different countries and auction formats," International Review of Law and Economics, Elsevier, vol. 68(C).
    2. Wallimann, Hannes & Imhof, David & Huber, Martin, 2020. "A Machine Learning Approach for Flagging Incomplete Bid-rigging Cartels," FSES Working Papers 513, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    3. Huber, Martin & Imhof, David, 2019. "Machine learning with screens for detecting bid-rigging cartels," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 277-301.
    4. David Imhof & Hannes Wallimann, 2021. "Detecting bid-rigging coalitions in different countries and auction formats," Papers 2105.00337, arXiv.org.
    5. Garcia Pires, Armando J. & Skjeret, Frode, 2023. "Screening for partial collusion in retail electricity markets," Energy Economics, Elsevier, vol. 117(C).

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    More about this item

    Keywords

    Bid rigging; Detection methods; Screens; Conditional independence test; Exchangeability test;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C40 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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