Collusion mechanisms in procurement auctions:An experimental investigation

Collusive agreements are often observed in procurement auctions. They are probablymore easily achieved when competitors’ costs are easily estimated. If, however, the individualcosts of bidders are private information, effective ring formation is difficult to realize.We compare experimentally different coordination mechanisms in a first-price procurementauction in how they promote the prospects of collusive arrangements. Onemechanism allows bidders to coordinate by means of unrestricted pre-play communication.The second one enables bidders to restrict their bidding range and the last one givesthem the opportunity to implement mutual shareholding. According to our results firstpriceprocurement is quite collusion-proof when allowing for the latter two coordinationmechanisms whereas, on average, pre-play communication increases bidders’ profits.

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Year of publication:	2006-07-31
Authors:	Brosig, Jeannette ; Güth, Werner ; Weiland, Torsten
Institutions:	Max-Planck-Institut für Ökonomik <Jena> / Abteilung Strategische Interaktion
Subject:	Koordination \| Kooperatives Verhalten \| Cheap talk communication \| Auktionstheorie \| auction \| Abgestimmtes Verhalten \| Collusion

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Extent:	264192 bytes 22 p. application/pdf
Series:	Max-Planck-Institut für Ökonomik - Papers on Strategic Interaction Discussionpaper ; 0614 (2006)
Type of publication:	Book / Working Paper
Language:	English
Classification:	C72 - Noncooperative Games ; H57 - Procurement ; K42 - Illegal Behavior and the Enforcement of Law ; Simulation methods ; Study of commerce ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)