Corruption and Renegotiation in Procurement

Leandro Arozamena, Juan José Ganuza and Federico Weinschelbaum
Additional contact information
Juan José Ganuza: Universitat Pompeu Fabra

No 334, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: A sponsor –e.g. a government agency– uses a procurement auction to select a supplier who will be in charge of the execution of a contract. That contract is incomplete: it may be renegotiated once the auction’s winner has been chosen. We examine a setting where one firm may bribe the agent in charge of monitoring contract execution so that the former is treated preferentially if renegotiation actually occurs. If a bribe is accepted, the corrupt firm will be more aggressive at the initial auction and thus win with a larger probability. We show that the equilibrium probability of corruption is larger when the initial contract is less complete, and when the corrupt firm’s cost is more likely to be similar to her rivals’. In addition, we examine how this influences the sponsor’s incentives when designing the initial contract.

Keywords: Auctions; Cost overruns; Procurement; Renegotiation; Corruption (search for similar items in EconPapers)
JEL-codes: C72 D44 D82 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2024-08
New Economics Papers: this item is included in nep-cta, nep-des and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://rednie.eco.unc.edu.ar/files/DT/334.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:334

Access Statistics for this paper

More papers in Working Papers from Red Nacional de Investigadores en Economía (RedNIE) Contact information at EDIRC.
Bibliographic data for series maintained by Laura Inés D Amato ().