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Collusion through market sharing agreements: Evidence from Quebec's road paving market

Adriano de Leverano

No 19-053, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: I study a case of market sharing agreements to provide evidence of coordination between colluding firms on the degree to which they compete against each other (henceforth referred to as head-to-head competition) and their bidding behavior. I also quantify the impact that coordinating head-to-head competition has on procurement costs. My focus is on the two largest rms bidding in provincial road paving procurement auctions in Quebec between 2007 and 2015. I use the police investigation into collusion and corruption in the Quebec construction industry launched in October 2009 to capture the end of this cartel. I find that after this date, the two suspected firms i) were more likely to bid in the same auction and ii) submitted significantly lower bids when they competed in the same auction. A structural model of entry and bidding shows that if the firms had kept competing head-to-head at the same rate as in the collusive period but had stopped colluding on bids, bids would have increased by about 3.86% with respect to the competitive scenario observed after the police investigation began. This finding suggests that there were additional procurement costs associated with firms coordinating on the degree of head-to-head competition.

Keywords: Auction; Bidding ring; Collusion; Public procurement (search for similar items in EconPapers)
JEL-codes: D44 H57 L22 L74 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-com, nep-cse, nep-des, nep-ind and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:19053

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