Corruption in multidimensional procurement auctions under asymmetry

Shivangi Chandel and Shubhro Sarkar

Economic Modelling, 2023, vol. 120, issue C

Abstract: We examine corruption in first and second-score procurement auctions with two asymmetric bidders. We assume that an agent, who is known to be corrupt with some exogenously known probability, asks for a bribe from one of two bidders and promises to manipulate bids in return. Using a symmetric quasi-linear scoring rule, we show that the agent approaches the weaker bidder for a bribe for higher levels of bidder asymmetry in both auction formats. Our numerical simulations suggest that the procurer prefers the first-score auction when the agent colludes with the stronger bidder in the second-score auction. If the weaker bidder is favored, on the other hand, the buyer switches to the second-score auction when the probability of corruption is high. This is due to the agent’s limited ability to manipulate bids in favor of the weaker bidder in the second-score auction. Finally, neither auction mechanism is efficient in the presence of corruption.

Keywords: Auctions; Asymmetric bidders; Corruption; Multidimensional procurement (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:120:y:2023:i:c:s0264999322004242

DOI: 10.1016/j.econmod.2022.106187

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