Collusion in Auctions with Constrained Bids: Theory and Evidence from Public Procurement

70 Pages Posted: 30 Oct 2015

See all articles by Sylvain Chassang

Sylvain Chassang

New York University (NYU) - Department of Economics

Juan Ortner

Boston University

Date Written: October 20, 2015

Abstract

We study the mechanics of cartel enforcement and its interaction with bidding constraints in the context of repeated procurement auctions. Under collusion, bidding constraints weaken cartels by limiting the scope for punishment. This yields a test of collusive behavior exploiting the counter-intuitive prediction that introducing minimum prices can lower the distribution of winning bids. The model's predictions are borne out in procurement data from Japan, where we find considerable evidence that collusion is weakened by the introduction of minimum prices.

Keywords: collusion, cartel enforcement, minimum prices, entry deterrence, procurement.

Suggested Citation

Chassang, Sylvain and Ortner, Juan, Collusion in Auctions with Constrained Bids: Theory and Evidence from Public Procurement (October 20, 2015). Princeton University William S. Dietrich II Economic Theory Center Research Paper No. 072_2015. Available at SSRN: https://ssrn.com/abstract=2683505 or http://dx.doi.org/10.2139/ssrn.2683505

Sylvain Chassang (Contact Author)

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

Juan Ortner

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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