Procurement Auctions with Uncertainty in Corruption

Shinya Horie
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Shinya Horie: Graduate School of Economics, Kobe University

No 1710, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: This paper considers a situation in which a corrupt government official does not commit to using the common corruption scheme called right of first refusal in a procurement auction. Under the right of first refusal, the contractors (or bidders) participate in a sequential auction, and there is no inefficiency in project allocation. However, in cases in which the scheme is not practiced, both contractors participate in a simultaneous auction, and the disadvantaged contractor bids more aggressively than the advantaged contractor. I found that such uncertainty regarding the practice of corruption schemes can lead to inefficiency, even when the corruption scheme itself is not practiced.

Keywords: Procurement Auctions; Corruption, Right of first refusal (search for similar items in EconPapers)
JEL-codes: C72 D44 L14 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2017-03
New Economics Papers: this item is included in nep-cta, nep-gth and nep-mic
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