IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpmi/0105002.html
   My bibliography  Save this paper

Corruption and auctions

Author

Listed:
  • Paulo Klinger Monteiro

    (EPGE-FGV)

  • Flavio Menezes

    (EPGE-FGV)

Abstract

We investigate the outcome of an auction where the auctioneer approaches one of the two existing bidders and offers an opportunity for him to match his opponent's bid in exchange for a bribe. In particular, we examine two types of corruption arrangements. In the first case, the auctioneer approaches the winner to offer the possibility of a reduction in his bid to match the loser's bid in exchange for a bribe. In the second arrangement, the auctioneer approaches the loser and offers him the possibility of matching the winner's bid in exchange for a bribe. While oral auctions are corruption free under the two arrangements, corruption affects both bidding behavior, efficiency and the seller's expected revenue in a first-price auction.

Suggested Citation

  • Paulo Klinger Monteiro & Flavio Menezes, 2001. "Corruption and auctions," Microeconomics 0105002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpmi:0105002
    Note: Type of Document - Postscript; prepared on PC; to print on PostScript; pages: 19
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0105/0105002.pdf
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mic/papers/0105/0105002.ps.gz
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. O. Compte & A. Lambert-Mogiliansky & T. Verdier, 2005. "Corruption and Competition in Procurement Auctions," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 1-15, Spring.
    2. Arozamena, Leandro & Weinschelbaum, Federico, 2009. "The effect of corruption on bidding behavior in first-price auctions," European Economic Review, Elsevier, vol. 53(6), pages 645-657, August.
    3. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
    4. 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.
    5. Ken Binmore & Paul Klemperer, 2002. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licences," Economic Journal, Royal Economic Society, vol. 112(478), pages 74-96, March.
    6. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
    7. Beck, Paul J. & Maher, Michael W., 1986. "A comparison of bribery and bidding in thin markets," Economics Letters, Elsevier, vol. 20(1), pages 1-5.
    8. Unknown, 1986. "Letters," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 1(4), pages 1-9.
    9. McAfee, R Preston & McMillan, John, 1992. "Bidding Rings," American Economic Review, American Economic Association, vol. 82(3), pages 579-599, June.
      • McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
    10. Menezes, Flavio M., 1996. "Multiple-unit English auctions," European Journal of Political Economy, Elsevier, vol. 12(4), pages 671-684, December.
    11. Bénédicte Vidaillet & V. d'Estaintot & P. Abécassis, 2005. "Introduction," Post-Print hal-00287137, HAL.
    12. Engelbrecht-Wiggans, Richard & Kahn, Charles M., 1991. "Protecting the winner : Second-price versus oral auctions," Economics Letters, Elsevier, vol. 35(3), pages 243-248, March.
    13. Celentani, Marco & Ganuza, Juan-Jose, 2002. "Corruption and competition in procurement," European Economic Review, Elsevier, vol. 46(7), pages 1273-1303, July.
    14. Paul Klemperer, 2004. "Auctions: Theory and Practice," Online economics textbooks, SUNY-Oswego, Department of Economics, number auction1.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.
    2. Helene Mass & Nicolas Fugger & Vitali Gretschko & Achim Wambach, 2020. "Imitation Perfection—A Simple Rule to Prevent Discrimination in Procurement," American Economic Journal: Microeconomics, American Economic Association, vol. 12(3), pages 189-245, August.
    3. Yvan Lengwiler & Elmar G. Wolfstetter, 2005. "Bid Rigging – An Analysis of Corruption in Auctions," CESifo Working Paper Series 1488, CESifo.
    4. Lengwiler, Yvan & Wolfstetter, Elmar, 2010. "Auctions and corruption: An analysis of bid rigging by a corrupt auctioneer," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 1872-1892, October.
    5. Kaplan, Todd R. & Zamir, Shmuel, 2015. "Advances in Auctions," Handbook of Game Theory with Economic Applications,, Elsevier.
    6. Huang, He & Li, Zhipeng, 2015. "Procurement auctions with ex-ante endogenous bribery," Economic Modelling, Elsevier, vol. 47(C), pages 111-117.
    7. Roberto Burguet, 2017. "Procurement Design with Corruption," American Economic Journal: Microeconomics, American Economic Association, vol. 9(2), pages 315-341, May.
    8. Minbo Xu & Daniel Z. Li, 2019. "Equilibrium competition, social welfare and corruption in procurement auctions," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 53(3), pages 443-465, October.
    9. Frédéric Boehm & Juanita Olaya, 2006. "Corruption In Public Contracting Auctions: The Role Of Transparency In Bidding Processes," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(4), pages 431-452, December.
    10. Roberto Burguet & Juan-José Ganuza & José García-Montalvo, 2016. "The Microeconomics of Corruption. A Review of Thirty Years of Research," Working Papers 908, Barcelona School of Economics.
    11. Xiaoshuai Fan & Ying‐Ju Chen & Christopher S. Tang, 2021. "To Bribe or Not in a Procurement Auction under Disparate Corruption Pressure," Production and Operations Management, Production and Operations Management Society, vol. 30(5), pages 1220-1245, May.
    12. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press, vol. 33(4), pages 541-571.
    13. Arozamena, Leandro & Weinschelbaum, Federico, 2009. "The effect of corruption on bidding behavior in first-price auctions," European Economic Review, Elsevier, vol. 53(6), pages 645-657, August.
    14. Satoru Fujishige & Zaifu Yang, 2020. "A Universal Dynamic Auction for Unimodular Demand Types: An Efficient Auction Design for Various Kinds of Indivisible Commodities," Discussion Papers 20/08, Department of Economics, University of York.
    15. Estrella Alonso & Joaquín Sánchez-Soriano & Juan Tejada, 2020. "Mixed Mechanisms for Auctioning Ranked Items," Mathematics, MDPI, vol. 8(12), pages 1-26, December.
    16. McAdams, David & Schwarz, Michael, 2007. "Who pays when auction rules are bent?," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 1144-1157, October.
    17. Arozamena, Leandro & Weinschelbaum, Federico, 2011. "On favoritism in auctions with entry," Economics Letters, Elsevier, vol. 110(3), pages 265-267, March.
    18. Ning Sun & Zaifu Yang, 2014. "An Efficient and Incentive Compatible Dynamic Auction for Multiple Complements," Journal of Political Economy, University of Chicago Press, vol. 122(2), pages 422-466.
    19. Vitali Gretschko & Achim Wambach, 2012. "Auctions vs. Negotiations: The Case of Favoritism," CESifo Working Paper Series 4045, CESifo.
    20. Chiappinelli, Olga, 2020. "Political corruption in the execution of public contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 116-140.

    More about this item

    Keywords

    corruption; auction; efficiency;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpmi:0105002. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.