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Cartels and Bribes

Author

Listed:
  • Roberto Burguet
  • Elisabetta Iossa
  • Giancarlo Spagnolo

Abstract

We study the relationship between collusion and corruption in a stylized model of repeated procurement where the cost of reporting corrupt bureaucrats gives rise to a free riding problem. As in Dixit (2015, 2016), cooperation among honest suppliers alleviates free-riding in reporting. However, it also facilitates collusion in bidding by increasing the value of the collusive rent. In turn, bidding collusion facilitates cooperation in reporting by increasing the value of having honest bureaucrats, generating a trade-off. When the likelihood of corruption is high and competition is weak, collusion may be a price worth paying to curb corruption.

Suggested Citation

  • Roberto Burguet & Elisabetta Iossa & Giancarlo Spagnolo, 2021. "Cartels and Bribes," GREEN Working Papers 16, GREEN, Centre for Research on Geography, Resources, Environment, Energy & Networks, Universita' Bocconi, Milano, Italy.
    • Handle: RePEc:bcu:greewp:greenwp16
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    References listed on IDEAS

    as
    1. Marhsall, Robert C. & Marx, Leslie M., 2014. "The Economics of Collusion: Cartels and Bidding Rings," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262525941, December.
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    6. Prashant Das & Charles R. Jr. Thomas, 2016. "Strategic Development of REITs in India," Journal of Real Estate Literature, Taylor & Francis Journals, vol. 24(1), pages 103-131, January.
    7. Reinaldo Diogo Luz & Giancarlo Spagnolo, 2017. "Leniency, Collusion, Corruption, And Whistleblowing," Journal of Competition Law and Economics, Oxford University Press, vol. 13(4), pages 729-766.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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