 To Bribe or Not in a Procurement Auction under Disparate Corruption PressureXiaoshuai Fan, Ying‐Ju Chen and Christopher S. Tang Production and Operations Management, 2021, vol. 30, issue 5, 1220-1245 Abstract: We examine a (large) manufacturer’s bribery decision (to bribe or not to bribe) arising from a procurement auction under “disparate corruption pressure” when another (small) manufacturer is known to offer the auctioneer (i.e., the intermediary) a bribe in exchange for the “right of first refusal.” We discover that the large manufacturer should refuse to pay bribes at all times in order to prevent from leaking its private cost information to the small manufacturer and prevent from intensifying the competition. However, even when the large manufacturer is disadvantaged for refusing to bribe, we show that it can benefit from this corrupted auction when the difference in production efficiency or the bribe is high so that the “positive force” (i.e., cost advantage) derived from the right of first refusal dominates the information disadvantage. Hence, under a specific condition, the large manufacturer has no incentive to expose the collusion between the intermediary and the corrupt manufacturer. Such a “silence tactic” provides a plausible explanation for the prevalence of corrupt auctions in practice. Date: 2021 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:popmgt:v:30:y:2021:i:5:p:1220-1245 Ordering information: This journal article can be ordered from Access Statistics for this article Production and Operations Management is currently edited by Kalyan Singhal More articles in Production and Operations Management from Production and Operations Management Society |
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