Detection of Bid Rigging in Procurement Auctions

40 Pages Posted: 3 Aug 2000

See all articles by Robert H. Porter

Robert H. Porter

Northwestern University - Department of Economics; National Bureau of Economic Research (NBER)

J. Douglas Zona

Charles River Associates (CRA)

Date Written: March 1992

Abstract

This paper examines bidding in auctions for state highway construction contracts on Long Island in the early 1980s, in order to determine whether bid rigging occurred. Detection of collusion is possible because of limited participation in the collusive scheme. The paper looks at differences in behavior between ring members and non-members. In these auctions, collusio did not take the form of a bid rotation scheme, in which only one ring member submits a bid. Instead, several ring members bid on most jobs. The apparent role of ring meetings prior to the auction was to designate a serious bidder, and its bid, and the other firms then frequently submitted phony higher bids. The bidding data indicate that the bids of non-cartel firms, as well as their rank distribution, were related to cost measures, such as how much backlog a firm was carrying. In contrast, the rank distribution of higher cartel bids was unrelated to similar cost measures, and differed from the distribution of the low cartel bid.

Suggested Citation

Porter, Robert H. and Zona, J. Douglas, Detection of Bid Rigging in Procurement Auctions (March 1992). NBER Working Paper No. w4013, Available at SSRN: https://ssrn.com/abstract=233705

Robert H. Porter (Contact Author)

Northwestern University - Department of Economics ( email )

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J. Douglas Zona

Charles River Associates (CRA) ( email )

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