Collusion Through Market Sharing Agreements: Evidence from Quebec‘s Road Paving Market

66 Pages Posted: 10 Dec 2019

See all articles by Adriano De Leverano

Adriano De Leverano

ZEW – Leibniz Centre for European Economic Research

Date Written: November 27, 2019

Abstract

I study a case of market sharing agreements to provide evidence of coordination between colluding firms on the degree to which they compete against each other (henceforth referred to as head-to-head competition) and their bidding behavior. I also quantify the impact that coordinating head-to-head competition has on procurement costs. My focus is on the two largest firms bidding in provincial road paving procurement auctions in Quebec between 2007 and 2015. I use the police investigation into collusion and corruption in the Quebec construction industry launched in October 2009 to capture the end of this cartel. I find that after this date, the two suspected firms i) were more likely to bid in the same auction and ii) submitted significantly lower bids when they competed in the same auction. A structural model of entry and bidding shows that if the firms had kept competing head-to-head at the same rate as in the collusive period but had stopped colluding on bids, bids would have increased by about 3.86% with respect to the competitive scenario observed after the police investigation began. This finding suggests that there were additional procurement costs associated with firms coordinating on the degree of head-to-head competition.

Keywords: Auction; Bidding ring; Collusion; Public procurement

JEL Classification: D44, H57, L22, L74

Suggested Citation

De Leverano, Adriano, Collusion Through Market Sharing Agreements: Evidence from Quebec‘s Road Paving Market (November 27, 2019). ZEW - Centre for European Economic Research Discussion Paper No. 19-053, Available at SSRN: https://ssrn.com/abstract=3500725 or http://dx.doi.org/10.2139/ssrn.3500725

Adriano De Leverano (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
10
Abstract Views
247
PlumX Metrics