Detecting Bidders Groups in Collusive Auctions
American Economic Journal: Microeconomics, Vol. 8, No. 2, 2016
Posted: 5 Nov 2019
Date Written: May 2016
Abstract
We study entry and bidding in procurement auctions where contracts are awarded to the bid closest to a trimmed average bid. These auctions, common in public procurement, create incentives to coordinate bids to manipulate the bid distribution. We present statistical tests to detect coordinated entry and bidding choices. The tests perform well in a validation dataset where a court case makes coordination observable. We use the tests to detect coordination in a larger dataset where it is suspected, but not known. The results are used to interpret a major market shakeout following a switch to first price auctions.
Keywords: Bidding, procurement, coordination
JEL Classification: D44, D47, H57, R42
Suggested Citation: Suggested Citation