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Bid Rigging and Entry Deterrence in Public Procurement: Evidence from an Investigation into Collusion and Corruption in Quebec

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  • Robert Clark
  • Decio Coviello
  • Jean-Fran�ois Gauthier
  • Art Shneyerov

Abstract

We study the impact of an investigation into collusion and corruption to learn about the organization of cartels in public procurement auctions. Our focus is on Montreal’s asphalt industry, where there have been allegations of bid rigging, market segmentation, complementary bidding, and bribes to bureaucrats, and where, in 2009, a police investigation was launched. We collect procurement data and use a difference-in-difference approach to compare outcomes before and after the investigation in Montreal and in Quebec City, where there have been no allegations of collusion or corruption. We find that entry and participation increased, and that the price of procurement decreased. We then decompose the price decrease to quantify the importance of two aspects of cartel organization, coordination and entry deterrence, for collusive pricing. We find that the latter explains only a small part of the decrease.

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  • Robert Clark & Decio Coviello & Jean-Fran�ois Gauthier & Art Shneyerov, 2018. "Bid Rigging and Entry Deterrence in Public Procurement: Evidence from an Investigation into Collusion and Corruption in Quebec," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(3), pages 301-363.
  • Handle: RePEc:oup:jleorg:v:34:y:2018:i:3:p:301-363.
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    Cited by:

    1. Hinloopen, Jeroen & Onderstal, Sander & Treuren, Leonard, 2020. "Cartel stability in experimental first-price sealed-bid and English auctions," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    2. Kei Kawai & Jun Nakabayashi & Juan Ortner & Sylvain Chassang, 2023. "Using Bid Rotation and Incumbency to Detect Collusion: A Regression Discontinuity Approach," Review of Economic Studies, Oxford University Press, vol. 90(1), pages 376-403.
    3. 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).
    4. Robert Clark & Decio Coviello & Adriano De Leverano, 2020. "Complementary bidding and the collusive arrangement: Evidence from an antitrust investigation," Working Paper 1446, Economics Department, Queen's University.
    5. Hannes Wallimann & David Imhof & Martin Huber, 2023. "A Machine Learning Approach for Flagging Incomplete Bid-Rigging Cartels," Computational Economics, Springer;Society for Computational Economics, vol. 62(4), pages 1669-1720, December.
    6. de Leverano, Adriano, 2019. "Collusion through market sharing agreements: Evidence from Quebec's road paving market," ZEW Discussion Papers 19-053, ZEW - Leibniz Centre for European Economic Research.
    7. Sylvain Chassang & Kei Kawai & Jun Nakabayashi & Juan M. Ortner, 2019. "Data Driven Regulation: Theory and Application to Missing Bids," NBER Working Papers 25654, National Bureau of Economic Research, Inc.
    8. Kang, Sungwon & Kim, Daehwan & Kim, Geonhyeong, 2023. "Corporate entertainment expenses and corruption in public procurement," Journal of Asian Economics, Elsevier, vol. 84(C).
    9. Hannes Wallimann & Silvio Sticher, 2023. "On suspicious tracks: machine-learning based approaches to detect cartels in railway-infrastructure procurement," Papers 2304.11888, arXiv.org.
    10. Clark, Robert & Fabiilli, Christopher & Lasio, Laura, 2022. "Collusion in the US generic drug industry," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    11. Sylvain Chassang & Kei Kawai & Jun Nakabayashi & Juan Ortner, 2022. "Robust Screens for Noncompetitive Bidding in Procurement Auctions," Econometrica, Econometric Society, vol. 90(1), pages 315-346, January.
    12. David Imhof & Hannes Wallimann, 2021. "Detecting bid-rigging coalitions in different countries and auction formats," Papers 2105.00337, arXiv.org.
    13. Nogues Comas,Antoni Albert & Mendes Dos Santos,Nuno Filipe, 2021. "Measuring Public Procurement Rules and Practices : Benchmarking a Recurrent Infrastructure Contract," Policy Research Working Paper Series 9651, The World Bank.
    14. Mark J. Garmaise & Gabriel Natividad, 2024. "Fiscal windfalls and entrepreneurship: fostering entry or promoting incumbents?," Small Business Economics, Springer, vol. 62(1), pages 133-158, January.
    15. Silveira, Douglas & de Moraes, Lucas B. & Fiuza, Eduardo P.S. & Cajueiro, Daniel O., 2023. "Who are you? Cartel detection using unlabeled data," International Journal of Industrial Organization, Elsevier, vol. 88(C).

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    More about this item

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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