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Corruption and auctions

  • Paulo Klinger Monteiro

    (EPGE-FGV)

  • Flavio Menezes

    (EPGE-FGV)

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.

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Paper provided by EconWPA in its series Microeconomics with number 0105002.

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Length: 19 pages
Date of creation: 25 May 2001
Date of revision:
Handle: RePEc:wpa:wuwpmi:0105002
Note: Type of Document - Postscript; prepared on PC; to print on PostScript; pages: 19
Contact details of provider: Web page: http://128.118.178.162

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  1. O. Compte & A. Lambert-Mogiliansky & T. Verdier, 2005. "Corruption and Competition in Procurement Auctions," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 1-15, Spring.
  2. Roberto Burguet & Martin Perry, 2000. "Bribery and Favoritism by Auctioneers in Sealed Bid Auctions," Econometric Society World Congress 2000 Contributed Papers 1827, Econometric Society.
  3. Menezes, Flavio M., 1996. "Multiple-unit English auctions," European Journal of Political Economy, Elsevier, vol. 12(4), pages 671-684, December.
  4. Marco Celentani & Juan J. Ganuza, 2000. "Corruption and competition in procurement," Economics Working Papers 464, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2001.
  5. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers 2004-W09, Economics Group, Nuffield College, University of Oxford.
  6. Paul Klemperer, 2004. "Introduction to Auctions: Theory and Practice
    [Auctions: Theory and Practice]
    ," Introductory Chapters, Princeton University Press.
  7. McAfee, R. Preston & McMillan, John., 1990. "Bidding Rings," Working Papers 726, California Institute of Technology, Division of the Humanities and Social Sciences.
  8. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
  9. Engelbrecht-Wiggans, R. & Kahn, C.M., 1990. "Protecting the Wnner: Second-price Versus Oral Auctions," University of Chicago - Economics Research Center 90-8, Chicago - Economics Research Center.
  10. Laffont, Jean-Jacques & Tirole, Jean, 1991. "Auction design and favoritism," International Journal of Industrial Organization, Elsevier, vol. 9(1), pages 9-42, March.
  11. Federico Weinschelbaum & Leandro Arozamena, 2005. "The Effect of Corruption on Bidding Behavior in First-Price Auctions," Working Papers 82, Universidad de San Andres, Departamento de Economia, revised Aug 2005.
  12. Beck, Paul J. & Maher, Michael W., 1986. "A comparison of bribery and bidding in thin markets," Economics Letters, Elsevier, vol. 20(1), pages 1-5.
  13. Rothkopf, Michael H & Teisberg, Thomas J & Kahn, Edward P, 1990. "Why Are Vickrey Auctions Rare?," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 94-109, February.
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