Collusion in Bidding Processes for Road Construction Projects: Modeling and Recommendations

By Miguel de Quinto Arrendonda Sr. (Superintendencia de Industria y Comercio)

This paper is intended to design a framework that allows explaining the collusive that can arise in some types of public procurement processes that imply construction works in Colombia. For that purpose, a standard Colombian public procurement process for road works is taken as the base and, using a Harsanyi framework, best response functions are used in order to define the strategies of the colluded firms when facing competition from another non-colluded firm, whose offer will be perfectly foreseeable. The strategy of the cartel when facing more than one non-colluded firms is also studied. At the end, some recommendations to hinder the formation of these cartels are listed.

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