Collusion in Auctions with Constrained Bids: Theory and Evidence from Public Procurement

Sylvain Chassang and Juan Ortner
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Sylvain Chassang: New York University

Working Papers from Princeton University, Department of Economics, Econometric Research Program.

Abstract: We study the mechanics of cartel enforcement and its interaction with bidding constraints in the context of repeated procurement auctions. Under collusion, bidding constraints weaken cartels by limiting the scope for punishment. This yields a test of repeated collusive behavior exploiting the counter-intuitive prediction that introducing minimum prices can lower the distribution of winning bids. The model’s predictions are borne out in procurement data from Japan, where we find evidence that collusion is weakened by the introduction of minimum prices. A robust design insight is that setting a minimum price at the bottom of the observed distribution of winning bids necessarily improves over a minimum price of zero.

Keywords: collusion; cartel enforcement; minimum prices; entry deterrence; procurement (search for similar items in EconPapers)
JEL-codes: D44 (search for similar items in EconPapers)
Date: 2017-02
New Economics Papers: this item is included in nep-com and nep-law
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Citations: View citations in EconPapers (10)

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http://people.bu.edu/jortner/index_files/minimumPrices.pdf

Related works:
Journal Article: Collusion in Auctions with Constrained Bids: Theory and Evidence from Public Procurement (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:metric:072_2015

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