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Competition Versus Collusion in Procurement Auctions: Identification and Testing

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  • Patrick Bajari
  • Lixin Ye

Abstract

February 2001 In this research, we develop an approach to the problem of identification and testing for bid-rigging in procurement auctions that tightly integrates economic theory and econometric practice. First, we introduce a general auction model with asymmetric bidders. We show how asymmetries can arise because of location, capacity constraints and collusion. Second, we study the problem of identification in our model. We state a set of conditions that are both necessary and sufficient for an observed set of bids to be generated by a model with competitive bidding. Third, we demonstrate how to test the conditions that characterize competitive bidding and apply these tests to a data set of bidding for procurement contracts. Working Papers Index

Suggested Citation

  • Patrick Bajari & Lixin Ye, 2001. "Competition Versus Collusion in Procurement Auctions: Identification and Testing," Working Papers 01001, Stanford University, Department of Economics.
  • Handle: RePEc:wop:stanec:01001
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    File URL: http://www-econ.stanford.edu/faculty/workp/swp01001.pdf
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    References listed on IDEAS

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    1. Rousseau, Peter L. & Sylla, Richard, 2005. "Emerging financial markets and early US growth," Explorations in Economic History, Elsevier, vol. 42(1), pages 1-26, January.
    2. Harley, C. Knick, 1992. "International Competitiveness of the Antebellum American Cotton Textile Industry," The Journal of Economic History, Cambridge University Press, vol. 52(03), pages 559-584, September.
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    Cited by:

    1. Steven Tadelis, 2009. "Auctions Versus Negotiations in Procurement: An Empirical Analysis," Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 372-399, October.
    2. Timothy N. Cason & Karthik N. Kannan & Ralph Siebert, 2011. "An Experimental Study of Information Revelation Policies in Sequential Auctions," Management Science, INFORMS, vol. 57(4), pages 667-688, April.

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