Corruption and Competition in Procurement

Universitat Pompeu Fabra Working Paper No. 464

23 Pages Posted: 20 Jul 2000  

Marco Celentani

Universidad Carlos III de Madrid - Department of Economics

Juan-José Ganuza

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: January 2001

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 equilibrium 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, and ii) an increase of competition in the market for procurement agents. We identify the effects that influence equilibrium corruption and show that, contrary to conventional wisdom, corruption may well be increasing in competition.

Keywords: corruption, competition, public procurement

JEL Classification: C72, D73, H57, K42

Suggested Citation

Celentani, Marco and Ganuza, Juan-José, Corruption and Competition in Procurement (January 2001). Universitat Pompeu Fabra Working Paper No. 464. Available at SSRN: https://ssrn.com/abstract=230544 or http://dx.doi.org/10.2139/ssrn.230544

Marco Celentani (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34-91-624 9546 (Phone)
+34-91-624 9875 (Fax)

Juan Ganuza

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 19 (Phone)
(34-98) 542 17 46 (Fax)

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