Corruption and competition in procurement

Abstract

We consider a procurement problem in which the procurement agent is supposed to allocate the realization of a project according to a competitive mechanism that values bids in terms of the proposed price and quality. Potential bidders have private information about their production costs. Since the procurement agent is also in charge of verifying delivered quality, in exchange for a bribe, he can allow an arbitrary …rm to be awarded the realization of the project and to produce a quality level lower than the announced. We compute equilibrium corruption and we study the impact on corruption of the competitiveness of the environment, and in particular of: i) an increase in the number of potential suppliers of the good or service to be procured, and ii) an increase of competition in the market for procurement agents. We identify the e¤ects that in ‡uence equilibrium corruption and show that, contrary to conventional wisdom, corruption may well be increasing in competition.

Competitive Procurement with Corruption

“…and Celentani and Ganuza (2002) study the issue of favoritism in procurement. The assignment of favor (i.e., who colludes with whom) is exogenous in these articles, whereas the current article endogenizes the assignment of the agent's favor through bribery competition.…”

Corruption in Procurement Auctions

“…They assume that the auctioneer has some leeway in assessing complex multidimensional bids, and is predisposed to favor a given bidder. That framework was later adopted and extended by several authors (for example Celantani and Ganuza (2002) and Burguet and Che (2004)). …”

First-price equilibrium and revenue equivalence in a sequential procurement auction model

“…Often projects to be auctioned off are similar and offered for execution during the same window of time. Although the sequential nature of procurement auctions is prevalent, many theoretical studies implicitly abstract it away by focussing on a single procurement auction in isolation (e.g., Holt 1980;Riordan and Sappington 1987;McAfee and McMillan 1987b;Dasgupta and Spulber 1989;Celentani and Ganuza 2002).…”