IDEAS home Printed from https://ideas.repec.org/a/spr/ecogov/v24y2023i4d10.1007_s10101-023-00296-3.html
   My bibliography  Save this article

Incompetence and corruption in procurement auctions

Author

Listed:
  • Krishnendu Ghosh Dastidar

    (Jawaharlal Nehru University)

  • Sonakshi Jain

    (University of Delhi)

Abstract

This paper analyzes the impact of incompetence and corruption in procurements. The government conducts a procurement auction where a firm that quotes the lowest bid wins the contract to construct a public good (subject to the fulfillment of the minimum quality requirement). Incompetence leads to measurement errors. There is also corruption in the system: if the measured quality falls short of the minimum stipulated level, the firm can pay a bribe to inflate the reported quality. We show that higher levels of corruption parameters unambiguously reduce the actual quality produced and the expected welfare. The effects of greater incompetence are more complicated. We show greater incompetence may lead to an increase in both equilibrium quality and welfare. This is counter-intuitive and goes against conventional wisdom. We also demonstrate that the winning firm chooses a quality that is strictly lower than the welfare-maximizing quality.

Suggested Citation

  • Krishnendu Ghosh Dastidar & Sonakshi Jain, 2023. "Incompetence and corruption in procurement auctions," Economics of Governance, Springer, vol. 24(4), pages 421-451, December.
    • Handle: RePEc:spr:ecogov:v:24:y:2023:i:4:d:10.1007_s10101-023-00296-3
    DOI: 10.1007/s10101-023-00296-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10101-023-00296-3
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10101-023-00296-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Procurement; Incompetence; Corruption; Bribe;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    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:spr:ecogov:v:24:y:2023:i:4:d:10.1007_s10101-023-00296-3. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.