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

Kei Kawai, Jun Nakabayashi, Juan Ortner, Sylvain Chassang

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

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, "Ohio School Milk Markets: An Analysis of Bidding", RAND Journal of Economics, 30, 263-288), and a sample of municipal procurement auctions from Japan.

Original languageEnglish (US)
Pages (from-to)376-403
Number of pages28
JournalReview of Economic Studies
Volume90
Issue number1
DOIs
StatePublished - Jan 2023

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Anti-trust
  • Backlog
  • Collusion
  • Incumbency
  • Procurement
  • Regression discontinuity

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