Detecting Large-Scale Collusion in Procurement Auctions

Posted by Social Science Research Network

Detecting Large-Scale Collusion in Procurement Auctions – Kei Kawai (New York University (NYU) – Leonard N. Stern School of Business – Department of Economics) and Jun Nakabayashi (Tohoku University)

ABSTRACT: This paper documents evidence of widespread collusion among construction firms using a novel dataset covering most of the construction projects procured by the Japanese national government from 2003 to 2006. By examining rebids that occur for auctions when all (initial) bids fail to meet the reserve price, we identify collusion using ideas similar to regression discontinuity. We identify about 1,000 firms whose conduct is inconsistent with competitive behavior. These bidders were awarded about 7,600 projects, or close to one fifth of the total number of construction projects in our sample. The value of these projects totals about $8.6 billion.(Cade).