Is Collusion Proof Auction Expensive? Estimates from Highway Procurements

Gaurab Aryal and Maria Gabrielli

MPRA Paper from University Library of Munich, Germany

Abstract: Collusion in auctions affects both revenue and efficiency and are prevalent. Yet, sellers do not use collusion-proof auctions as often as they should. Why is that? We find that one reason for this could be the cost of implementing efficient collusion-proof auctions. We use California highway procurements data, to estimate the cost of implementing collusion-proof auction. Our estimates show that cost must increase by at least 10.8% to ensure efficient outcome. The cost can sometimes be as high as 48.8% (depending on the size of bidding-ring in the data).

Keywords: Public Procurement; Collusion-Proof Auction; Local Polynomial; Efficiency-Revenue Trade-off (search for similar items in EconPapers)
JEL-codes: C1 C13 C4 D44 L41 (search for similar items in EconPapers)
Date: 2012-02-19, Revised 2014-02-19
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:57353

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