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Debarment and Collusion in Procurement Auctions

Author

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  • Claudia Cerrone

    (Max Planck Institute for Research on Collective Goods)

  • Author-Name: Yoan Hermstruwer

    (Max Planck Institute for Research on Collective Goods
    Competition Authority, Lisboa, Portugal)

Abstract

This article presents the first experiment exploring the impact of debarments – the exclusion of colluding bidders – on collusion in procurement auctions. We find that debarments reduce collusion and bids relative to a market with no sanction. The deterrent effect of debarments increases in the length of the punishment. However, shorter debarments reduce efficiency and increase the bids of non-debarred bidders. This suggests that debarments that are too lenient may trigger tacit collusion among the bidders who remain in the market, thereby facilitating the very behavior they aim to deter.

Suggested Citation

  • Claudia Cerrone & Author-Name: Yoan Hermstruwer, 2018. "Debarment and Collusion in Procurement Auctions," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2018_05, Max Planck Institute for Research on Collective Goods, revised Apr 2021.
    • Handle: RePEc:mpg:wpaper:2018_05
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    More about this item

    Keywords

    debarment; collusion; procurement auctions; procurement law; sanctions;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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