Clustering of the two most competitive bids in first-price auctions can be indicative of collusive behavior. However, it can also reflect non-cooperative strategies under complete information. I propose a simple procedure to distinguish between the two observationally equivalent explanations. This method requires the knowledge of winning bids and the determinants of the bid of the second most competitive bidder.
Clustered bids and a missing mass of nearly tied bids have both been proposed as markers of collusion. We present causal empirical evidence from an actual procurement cartel that bidding involves both clustering and a gap around the winning bid. We support these results with information from testimony of cartel participants that explain how both patterns arise naturally as part of an arrangement featuring complementary bidding. Based on these findings, we develop an easy-to-implement screen for collusive arrangements featuring complementary bidding.
I study a case of market sharing agreements between the two largest firms bidding in road paving procurement auctions in Quebec between 2007 and 2015. I use the police investigation into collusion in the Quebec construction industry launched in October 2009 to capture the end of this cartel. I find that after this date, the two suspected firms i) were more likely to bid in the same auction and ii) submitted significantly lower bids when they competed in the same auction. A structural model of entry and bidding shows that coordinating entry in auctions is associated with additional procurement costs.
Previous WP version: ZEW Discussion Paper 19-053, November 2019 and related BibTex citation
We examine the impact of centralization on medical-device procurement by hospitals. We leverage a comprehensive dataset on device orders from Italy and take advantage of a legislative change that mandated centralized purchases for a sub-set of devices. Consistent with previous studies we find that centralization reduces prices for centralized devices relative to non-centralized purchases. Uniquely, our dataset contains information on order and delivery dates, allowing us to also study the impact on delivery times. We find that statutory centralization resulted in a small increase in delivery times. Using data on quantities, the identity of suppliers and their balance sheets, we examine mechanisms potentially underlying our findings.
Previous WP version: ZEW Discussion Paper No. 21-063, December 2021 and related BibTex citation
The supply side effects of uniform pricing policies
Entry coordination in Georgian Public Procurement Auctions (with Leonardo Giuffrida and Viteszlav Titl)
Uncertainty about number of rivals and bidding aggressiveness (with Atabek Atayev)