Efficiency and bid rigging in simultaneous procurement auctions under oligopoly Online publication date: Thu, 09-Apr-2020
by Aaro Hazak; Tanel Kerikmäe; Evelin Pärn-Lee
International Journal of Procurement Management (IJPM), Vol. 13, No. 2, 2020
Abstract: Splitting of large procurements into several smaller ones has been propagated, for example in the European Union and OECD members, as a way for enhancing competition and improving institutional framework for market efficiency. This paper presents a conceptual argumentation on the causes and consequences of potential bid rigging when simultaneous bids for similar goods are asked from oligopolists. It appears that calling for similar bids simultaneously may incentivise collusion among bidders, while arranging several consecutive procurement auctions could lessen that problem. Moreover, simultaneous procurement auctions may result in a relatively high cost of supply due to the larger risks involved for bidders. Furthermore, bid rigging remains difficult to detect under simultaneous procurement auctions due to a large degree of uncertainty for bidders, which supports relatively high bid prices that may, in fact, be collusive.
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