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Using Bid Rotation and Incumbency to Detect Collusion: A Regression Discontinuity Approach

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  • Kei Kawai
  • Jun Nakabayashi
  • Juan M. Ortner
  • Sylvain Chassang

Abstract

Cartels participating in procurement auctions frequently use bid rotation or prioritize incumbents to allocate contracts. However, establishing a link between observed allocation patterns and firm conduct has been difficult: there are cost-based competitive explanations for such patterns. We show that by focusing on auctions in which the winning and losing bids are very close, it is possible to distinguish allocation patterns reflecting cost differences across firms from patterns reflecting non-competitive environments. We apply our tests to two datasets: the sample of Ohio milk auctions studied in Porter and Zona (1999), and a sample of municipal procurement auctions from Japan.

Suggested Citation

  • Kei Kawai & Jun Nakabayashi & Juan M. Ortner & Sylvain Chassang, 2022. "Using Bid Rotation and Incumbency to Detect Collusion: A Regression Discontinuity Approach," NBER Working Papers 29625, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29625
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    Cited by:

    1. Cappelletti, Matilde & Giuffrida, Leonardo M., 2021. "Procuring survival," ZEW Discussion Papers 21-093, ZEW - Leibniz Centre for European Economic Research.
    2. Aljoscha Janssen, 2022. "Price dynamics of Swedish pharmaceuticals," Quantitative Marketing and Economics (QME), Springer, vol. 20(4), pages 313-351, December.
    3. Panhans, Matthew T., 2023. "The Rise, Fall, and Legacy of the Structure-Conduct-Performance Paradigm," SocArXiv dvm3e, Center for Open Science.
    4. Granlund, David & Rudholm, Niklas, 2023. "Calculating the probability of collusion based on observed price patterns," Umeå Economic Studies 1014, Umeå University, Department of Economics, revised 13 Oct 2023.
    5. Matilde Cappelletti & Leonardo M. Giuffrida & Gabriele Rovigatti & Leonardo Maria Giuffrida, 2022. "Procuring Survival," CESifo Working Paper Series 10124, CESifo.
    6. Lu, Jiaxuan, 2023. "The economics of China’s between-city height competition: A regression discontinuity approach," Regional Science and Urban Economics, Elsevier, vol. 100(C).

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    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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