Favor exchange in collusion: Empirical study of repeated procurement auctions in Japan

Ishii, Rieko

doi:10.1016/j.ijindorg.2008.05.006

Cited by 72 publications

(28 citation statements)

References 9 publications

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“…The inner-workings of potential cartels would surely be reflected in network structure of the market. Observed cartels in other contexts have operated by methods such as rotating the winner [31], by side payments to losing firms [44], and some even run internal auctions to optimize their profits [6]. Observing the relationship between the procedure by which contracts are awarded, for example to the trimmedaverage bidder in Italian road contracts [16] or by randomly chosen open or sealed bid procedures in timber auctions [7], and network structure may also reveal whether firms are competing or colluding.…”

Section: Discussionmentioning

confidence: 99%

A network approach to cartel detection in public auction markets

Wachs

Kertész²

2019

Sci Rep

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Competing firms can increase profits by setting prices collectively, imposing significant costs on consumers. Such groups of firms are known as cartels and because this behavior is illegal, their operations are secretive and difficult to detect. Cartels feel a significant internal obstacle: members feel short-run incentives to cheat. Here we present a network-based framework to detect potential cartels in bidding markets based on the idea that the chance a group of firms can overcome this obstacle and sustain cooperation depends on the patterns of its interactions. We create a network of firms based on their co-bidding behavior, detect interacting groups, and measure their cohesion and exclusivity, two group-level features of their collective behavior. Applied to a market for school milk, our method detects a known cartel and calculates that it has high cohesion and exclusivity. In a comprehensive set of nearly 150,000 public contracts awarded by the Republic of Georgia from 2011 to 2016, detected groups with high cohesion and exclusivity are significantly more likely to display traditional markers of cartel behavior. We replicate this relationship between group topology and the emergence of cooperation in a simulation model. Our method presents a scalable, unsupervised method to find groups of firms in bidding markets ideally positioned to form lasting cartels.

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Section: Discussionmentioning

confidence: 99%

A network approach to cartel detection in public auction markets

Wachs

Kertész²

2019

Sci Rep

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“…For example, Chaserant (2006) showed that responders are more likely to accept offers from members of the same social group. Ishii (2009) found that repeated public-work auctions in Japan have resulted in rings of firms that favor ingroup partners. Lee (2008) documented examples of ingroup favoritism motivated by nationalistic sentiments.…”

Section: Setting and Research Questionsmentioning

confidence: 99%

Group identity in markets

Doğan

Haruvy

2011

International Journal of Industrial Organization

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“…The first term of the integrand is the net surplus that the winner of the auction enjoys (the value of the object minus her bid), while the others represent the ex-ante probability of winning the auction. 11 The interim expected utility, i.e. the expected utility for an observed and therefore fixed signal s is…”

Section: Vmentioning

confidence: 99%

Auctions with Endogenous Price Ceiling: Theoretical and Experimental Results

et al. 2009

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper analyzes an auction mechanism that excludes overoptimistic bidders inspired by the rules of the procurement auctions adopted by several Japanese local governments. Terms of use: Documents in EconStor mayOur theoretical and experimental results suggest that the endogenous exclusion rule reduces the probability of suffering a monetary loss induced by winning the auction, and also mitigates the problem of the winner's curse in the laboratory. However, this protection comes at the price of a lower revenue for the seller.

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Favor exchange in collusion: Empirical study of repeated procurement auctions in Japan

Cited by 72 publications

References 9 publications

A network approach to cartel detection in public auction markets

A network approach to cartel detection in public auction markets

Group identity in markets

Auctions with Endogenous Price Ceiling: Theoretical and Experimental Results

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