Corruption and competition in procurement

Marco Celentani () and Juan-José Ganuza

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We consider a procurement problem in which the procurement agent is supposed to allocate the realization of a project according to a competitive mechanism that values bids in terms of the proposed price and quality. Potential bidders have private information about their production costs. Since the procurement agent is also in charge of verifying delivered quality, in exchange for a bribe, he can allow an arbitrary firm to be awarded the realization of the project and to produce a quality level lower than the announced. We compute the equilibrium level of corruption and we study the impact on corruption of the competitiveness of the environment, and in particular of: i) an increase in the number of potential suppliers of the good or service to be procured, ii) competitive (rather than collusive) behavior of procurement agents, and iii) an increase of competition in the market for procurement agents. We identify the effects that influence the equilibrium level of corruption and show that, contrary to conventional wisdom, corruption may well be increasing in competition.

Keywords: Corruption; competition; public procurement (search for similar items in EconPapers)
JEL-codes: C72 D73 H57 K42 (search for similar items in EconPapers)
Date: 2000-03, Revised 2001-03
New Economics Papers: this item is included in nep-law, nep-mic and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Journal Article: Corruption and competition in procurement (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:464

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