Article (Journal/Review)
Corruption and auctions
Fecha
2006Registro en:
0304-4068
10.1016/j.jmateco.2005.04.002
2-s2.0-32044457545
Autor
Menezes, Flavio Marques
Monteiro, P. K.
Institución
Resumen
We investigate how corruption affects the outcome of a first-price auction (bidding behavior, efficiency and the seller's expected revenue). The auctioneer approaches the winner to offer the possibility of a reduction in his bid in exchange for a bribe. The bribe can be a percentage of the difference between the winning and the second-highest bid or a fixed amount. We show that there exists a symmetric bidding strategy equilibrium that is monotone, i.e., higher valuation buyers bid higher. Corruption does not affect efficiency but both the auctioneer's expected bribe and the seller's expected revenue depend on the format of the bribe payments. We also find the optimal bribe scheme. © 2005 Elsevier B.V. All rights reserved.