Ownership Networks and Bid Rigging
71 Pages Posted: 27 Dec 2018 Last revised: 6 Oct 2019
Date Written: September 1, 2019
Using a dataset of public procurement auctions and registered shareholders of all participating firms in Singapore, we study the effects of suppliers' ownership connections on prices and efficiency in the product market. We find identical bidding in the same sealed-bid auction is prevalent and positively correlated with ownership connections among bidders. Moreover, the identical bidding attributable to ownership connections is positively associated with contract price when the lowest bidder wins. Structural estimates based on a model of first-price auctions show the removal of an ownership connection can improve a contractor's cost efficiency by more than it reduces contract price, highlighting how ownership networks hinder competition.
Keywords: Common Ownership, Public Procurement Auctions, Connected Owners, Ownership, Corporate Governance
JEL Classification: D44, G32, H57, L14, L41
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