Measuring the Effects of Bid-Rigging on Prices with Binary Misclassification

Seoyun Hong (), Chang Sik Kim and Hyunchul Kim ()
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Seoyun Hong: Boston University
Hyunchul Kim: Sungkyunkwan University

Review of Industrial Organization, 2022, vol. 61, issue 3, No 5, 319-339

Abstract: Abstract The binary indicator of collusion is the key ingredient in estimating overcharges from bid-rigging with a regression-based approach. We develop a method for examining the effects of misclassification error in the indicator of bid-rigging status on estimates of damages from collusion. We derive partial identification of the regression model of winning bids in public procurement auctions and provide informative bounds on the price effects of bid-rigging. We find that the bounds are tight when placing a plausible restriction on the extent of measurement errors. Our findings show that relaxing the nondifferential assumption about misclassification errors leads to wider bounds.

Keywords: Bid-rigging; Overcharges; Binary regressors; Misclassification error; Partial identification (search for similar items in EconPapers)
JEL-codes: C10 C20 L12 L41 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11151-022-09876-9

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