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The effect of corruption on bidding behavior in first-price auctions

  • Arozamena, Leandro
  • Weinschelbaum, Federico

When the owner of an object sells it through an auction run by an agent of hers, corruption may appear. In a first-price auction, corruption can make honest bidders more or less aggressive, or their behavior can remain unchanged. We identify sufficient conditions for each of the three possibilities. We analyze the effects of corruption on efficiency, bidders' welfare and expected revenue. Our results apply as well to the situation--unrelated to corruption--where one of the bidders is granted a right of first refusal.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 53 (2009)
Issue (Month): 6 (August)
Pages: 645-657

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Handle: RePEc:eee:eecrev:v:53:y:2009:i:6:p:645-657
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  18. Jones, C. & Menezes, F., 1995. "Auctions and Corruption: How to Compensate the Auctioneer," Papers 291, Australian National University - Department of Economics.
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