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Title

Bribery and favoritism by auctioneers in sealed-bid auctions

AuthorsBurguet, Roberto CSIC ORCID ; Perry, Martin K.
Issue Date2007
PublisherBerkeley Electronic Press
CitationBE Journal of Theoretical Economics 7(1): (2007)
AbstractWe consider a model of bribery in an asymmetric procurement auction. In return for a bribe from the dishonest supplier, the auctioneer has the discretion to allow this supplier to revise his bid downward to match the low bid of the honest supplier. The dishonest supplier can also win the contract outright without paying a bribe by bidding below the honest supplier. We investigate the effect of the bribe share and the cost distributions on the bidding functions, the allocative distortion, and the expected price paid by the buyer. The dishonest supplier bids more aggressively to win the contract outright when the auctioneer takes a larger bribe share. Bribery and the implied right of first refusal introduce a new allocative distortion in favor of the dishonest supplier. Finally, we use the power family of cost distributions to examine the expected price paid by the buyer. When the dishonest supplier has a more favorable cost distribution, there exist bribe shares sufficiently large such that the expected price paid by the buyer can actually decline as a result of bribery. Copyright © 2007 The Berkeley Electronic Press. All rights reserved.
URIhttp://hdl.handle.net/10261/57456
DOIhttp://dx.doi.org/10.2202/1935-1704.1219
Identifiersdoi: 10.2202/1935-1704.1219
e-issn: 1935-1704
Appears in Collections:(IAE) Artículos
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