Using Bid Rotation and Incumbency to Detect Collusion: A Regression Discontinuity Approach

20.500.12592/8t5s7t

Using Bid Rotation and Incumbency to Detect Collusion: A Regression Discontinuity Approach

6 Jan 2022

Cartels participating in procurement auctions frequently use bid rotation or prioritize incumbents to allocate contracts. However, establishing a link between observed allocation patterns and firm conduct has been difficult: there are cost-based competitive explanations for such patterns. We show that by focusing on auctions in which the winning and losing bids are very close, it is possible to distinguish allocation patterns reflecting cost differences across firms from patterns reflecting non-competitive environments. We apply our tests to two datasets: the sample of Ohio milk auctions studied in Porter and Zona (1999), and a sample of municipal procurement auctions from Japan.
industrial organization antitrust

Authors

Kei Kawai, Jun Nakabayashi, Juan M. Ortner, Sylvain Chassang

Acknowledgements & Disclosure
We thank Frank Wolak for helpful comments on an early draft. We also thank seminar audiences at Bonn, Boston University, Duke, Humboldt University in Berlin, Northwestern, Stanford, the University of Chicago, UPenn, the 2019 Berkeley-Paris Organizational Economics Workshop, the 2019 UCLA IO Mini conference and UCSD, for helpful comments. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
DOI
https://doi.org/10.3386/w29625
Published in
United States of America

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