Competition Versus Collusion in Procurement Auctions: Identification and Testing

Patrick Bajari and Lixin Ye ()

Working Papers from Stanford University, Department of Economics

Abstract: February 2001

In this research, we develop an approach to the problem of identification and testing for bid-rigging in procurement auctions that tightly integrates economic theory and econometric practice. First, we introduce a general auction model with asymmetric bidders. We show how asymmetries can arise because of location, capacity constraints and collusion. Second, we study the problem of identification in our model. We state a set of conditions that are both necessary and sufficient for an observed set of bids to be generated by a model with competitive bidding. Third, we demonstrate how to test the conditions that characterize competitive bidding and apply these tests to a data set of bidding for procurement contracts.

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Date: 2001-02
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (7)

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