Data Driven Regulation: Theory and Application to Missing Bids

Sylvain Chassang (), Kei Kawai (), Jun Nakabayashi and Juan Ortner
Additional contact information
Sylvain Chassang: New York University
Kei Kawai: U.C. Berkeley

No WP2019-04, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: We document a novel bidding pattern observed in procurement auctions from Japan: winning bids tend to be isolated. There is a missing mass of close losing bids. This pattern is suspicious in the following sense: it is inconsistent with compet- itive behavior under arbitrary information structures. Building on this observation, we develop a theory of data-driven regulation based on “safe tests,†i.e. tests that are passed with probability one by competitive bidders, but need not be passed by non-competitive ones. We provide a general class of safe tests exploiting weak equilib- rium conditions, and show that such tests reduce the set of equilibrium strategies that cartels can use to sustain collusion. We provide an empirical exploration of various safe tests in our data, as well as discuss collusive rationales for missing bids. Keywords: missing bids, collusion, regulation, procurement.

Keywords: missing bids; collusion; regulation; procurement (search for similar items in EconPapers)
Pages: 55 pages
Date: 2019-03
New Economics Papers: this item is included in nep-com and nep-des
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Citations: View citations in EconPapers (11)

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Working Paper: Data Driven Regulation: Theory and Application to Missing Bids (2019)
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