Is Collusion-proof Procurement Expensive?

Gaurab Aryal and Maria Gabrielli
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Gaurab Aryal: University of Chicago

No 248, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: Collusion adversely affects procurement cost and efficiency. It is hard to quantify just how prevalent collusion is, but it’s safe to assume that there’s a lot of collusion going on. Detecting collusion from (just) bid data is hard so the extent of the damages can never be known. A natural response would have been to use collusion-proof procurement, yet, such auctions are hardly used. Why? Using California highway procurements data, we estimate the extra cost of implementing a collusion-proof auction to be anywhere between 1.6% to 5%. Even after we factor in the marginal excess burden of taxes needed to finance the expenses, the cost ranges between 2.08% and 6.5%, which is too small to be the answer. Since other than cost there is no obvious answer, this shows that there is a lacuna in the empirical auction literature.

Keywords: Procurements; Collusion-Proof Auction; Local Polynomial Estimator (search for similar items in EconPapers)
JEL-codes: C1 C4 C7 D44 L4 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2023-06
New Economics Papers: this item is included in nep-com, nep-des, nep-ind and nep-reg
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https://rednie.eco.unc.edu.ar/files/DT/248.pdf (application/pdf)

Related works:
Working Paper: Is Collusion-Proof Procurement Expensive? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:248

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