The Effect of Corruption on Bidding Behavior in First-Price Auctions
When the owner of an object sells it through an auction run by an agent of hers, corruption may appear. In a first-price auction, corruption can make honest bidders more or less aggressive, or their behavior can remain unchanged. We identify sufficient conditions for each of the three possibilities. We analyze the effects of corruption on efficiency, bidders' welfare and expected revenue. Our results apply as well to the situation--unrelated to corruption--where one of the bidders is granted a right of first refusal.
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|Date of creation:||Feb 2005|
|Date of revision:||Aug 2005|
|Publication status:||Published in European Economic Review, Vol. 53, Issue 6, August 2005, pp. 645-657|
|Contact details of provider:|| Postal: Vito Dumas 284, Victoria, Buenos Aires, B1644BID|
Web page: http://www.udesa.edu.ar
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