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Corruption and auctions

Author

Listed:
  • Paulo Klinger Monteiro

    (EPGE-FGV)

  • Flavio Menezes

    (EPGE-FGV)

Abstract

We investigate the outcome of an auction where the auctioneer approaches one of the two existing bidders and offers an opportunity for him to match his opponent's bid in exchange for a bribe. In particular, we examine two types of corruption arrangements. In the first case, the auctioneer approaches the winner to offer the possibility of a reduction in his bid to match the loser's bid in exchange for a bribe. In the second arrangement, the auctioneer approaches the loser and offers him the possibility of matching the winner's bid in exchange for a bribe. While oral auctions are corruption free under the two arrangements, corruption affects both bidding behavior, efficiency and the seller's expected revenue in a first-price auction.

Suggested Citation

  • Paulo Klinger Monteiro & Flavio Menezes, 2001. "Corruption and auctions," Microeconomics 0105002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpmi:0105002
    Note: Type of Document - Postscript; prepared on PC; to print on PostScript; pages: 19
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    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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