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Corruption and renegotiation in procurement

Author

Listed:
  • Arozamena, Leandro
  • Ganuza, Juan-José
  • Weinschelbaum, Federico

Abstract

A government agency uses a procurement auction to select a supplier for an incomplete contract that may be renegotiated after awarding. We study a case where a firm can bribe the monitoring agent to gain preferential treatment during renegotiation. If bribery occurs, the corrupt firm bids more aggressively and has a higher chance of winning. The likelihood of corruption increases when contracts are less complete, the corrupt firm’s cost is more likely to be similar to her rivals’, and when there are fewer competitors.

Suggested Citation

  • Arozamena, Leandro & Ganuza, Juan-José & Weinschelbaum, Federico, 2025. "Corruption and renegotiation in procurement," Economics Letters, Elsevier, vol. 255(C).
    • Handle: RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525003337
    DOI: 10.1016/j.econlet.2025.112496
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    References listed on IDEAS

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    1. McAfee, R. Preston & McMillan, John, 1989. "Government procurement and international trade," Journal of International Economics, Elsevier, vol. 26(3-4), pages 291-308, May.
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    9. Roberto Burguet & Juan-José Ganuza & José G Montalvo, 2018. "The microeconomics of corruption," Chapters, in: Luis C. Corchón & Marco A. Marini (ed.), Handbook of Game Theory and Industrial Organization, Volume II, chapter 16, pages 420-450, Edward Elgar Publishing.
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    Keywords

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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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