Ownership Networks and Bid Rigging

Abstract

Using a dataset of public procurement auctions and registered shareholders of all bidding firms in Singapore, we study the effects of ownership networks on prices and efficiency in product markets. We document prevalent identical bidding that is positively correlated with ownership networks among bidders. Moreover, the component of identical bidding correlated with ownership network is positively associated with contract prices. Structural estimates based on a model of first-price auctions show the removal of ownership network effects can improve a contractor's cost efficiency by more than it reduces contract price, highlighting how ownership networks can hinder competition.

Keywords: Common Ownership, Public Procurement Auctions, Corporate Governance

JEL Classification: D44, G32, L14, L41, H57