Corruption and Auctions

19 Pages Posted: 30 May 2001

See all articles by Paulo Klinger Monteiro

Paulo Klinger Monteiro

Getulio Vargas Foundation (FGV) - EPGE

Flavio M. Menezes

University of Queensland - School of Economics

Date Written: May 25, 2001

Abstract

We investigate the outcome of an auction where the auctioneer approaches one of the two existing bidders and offers an opportunity for him to match his opponent's bid in exchange for a bribe. In particular, we examine two types of corruption arrangements. In the first case, the auctioneer approaches the winner to offer the possibility of a reduction in his bid to match the loser's bid in exchange for a bribe. In the second arrangement, the auctioneer approaches the loser and offers him the possibility of matching the winner's bid in exchange for a bribe. While oral auctions are corruption free under the two arrangements, corruption affects both bidding behavior, efficiency and the seller's expected revenue in a first-price auction.

Keywords: corruption, auction, efficiency

JEL Classification: D44, D82, K4

Suggested Citation

Monteiro, Paulo Klinger and Menezes, Flavio M., Corruption and Auctions (May 25, 2001). Available at SSRN: https://ssrn.com/abstract=271290 or http://dx.doi.org/10.2139/ssrn.271290

Paulo Klinger Monteiro (Contact Author)

Getulio Vargas Foundation (FGV) - EPGE ( email )

sala 1103
Rio de Janeiro RJ, 22250-900
Brazil
+55 21 37995838 (Phone)
+55 21 25538821 (Fax)

Flavio M. Menezes

University of Queensland - School of Economics ( email )

Brisbane, QLD 4072
Australia

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