Auctions vs Negotiations under Corruption: Evidence from Land Sales in China

Alper Arslan (), Robert Clark () and Qidi Hu ()
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Alper Arslan: Department of Economics at the University of Texas at San Antonio
Robert Clark: Queen's University
Qidi Hu: Queen's University

No 1524, Working Paper from Economics Department, Queen's University

Abstract: This study investigates whether corruption differentially affects contracting through auctions and negotiations. Using data on Chinese land-market transactions, where corruption is known to be present, we first show that, on average, it exerts similar effects on transactions carried out via auctions and negotiation. However, this finding masks important heterogeneity – auctionsfeaturing healthy competition are less affected by corruption, and significantly less so than negotiation. We then develop a simple model of bidding under the possibility of corruption that rationalizes our findings.

Pages: 67 pages
Date: 2025-01
New Economics Papers: this item is included in nep-des
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