Presenter: Hayri Alper Arslan
Paper: “Auctions vs Negotiations under Corruption: Evidence from Land Sales in China," joint work with Robert Clark and Qidi Hu
Abstract:
This study investigates whether corruption differentially affects contracting through auctions and negotiations. Using data on Chinese land-market transactions, where corruption is known to be present, we first show that, on average, it exerts similar effects on transactions carried out via auctions and negotiation. However, this finding masks important heterogeneity – auctions featuring healthy competition are less affected by corruption, and significantly less so than negotiation. We then develop a simple model of bidding under the possibility of corruption that rationalizes our findings.