Corruption And Competition In Public Market Auctions

Olivier Compte (), Ariane Lambert-Mogiliansky () and Thierry A. Verdier ()

No 2434, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper investigates the effect of corruption on competition in government procurement auctions. Our assumption is that the bureaucrat (i.e. the agent that administers the market), if corrupt, may provide a favour in exchange for a bribe. The favour we consider in most of our analysis is the opportunity to readjust a bid. We show that a key effect of corruption is to facilitate collusion in price between firms. This can result in high public spending and inefficient allocation. We discuss the effect of other forms of bureaucratic discretion in the procurement process and analyse conditions under which unilateral anti-corruption controls may restore price competition.

Keywords: Auction Procedures; Collusion; Controls; Corruption (search for similar items in EconPapers)
JEL-codes: D44 D73 K42 L12 (search for similar items in EconPapers)
Date: 2000-04

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Working Paper: Corruption and Competition in Public Market Auctions (2000)
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