Comparing Competition and Collusion in Procurement Auctions: A Numerical Approach
AbstractJanuary 2000, Revised January 2001 Collusion is a serious problem in many procurement auctions. In this research, I study a model of first price sealed bid procurement auctions with asymmetric bidders. I demonstrate that the equilibrium to the model is unique and describe three algorithms that can be used to compute the inverse equilibrium bid functions. I then use the computational algorithms to compare competitive and collusive bidding. The algorithms are useful for structural estimation of auction models and for assessing the damages from bid-rigging.
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2000-01-24 (All new papers)
- NEP-CMP-2000-02-03 (Computational Economics)
- NEP-IND-2000-01-24 (Industrial Organization)
- NEP-MIC-2000-01-24 (Microeconomics)
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