Seminar by Elena Podkolzina

SALA SEMINARI - 1° PIANO, PALAZZO LEVI CASES VIA DEL SANTO 33 - ORE 13.00

12.09.2019

Seminar by Elena Podkolzina, Higher School of Economics (HSE-NRU, Moscow)

Title: "Corrupt reserve prices"

Abstract: We develop a new methodology to identify corruption in public procure- ment auctions with reserve prices and apply it to Russian public procure- ment auctions of gasoline in 2011-2013. We identify corrupt procurer-seller pairs by exploiting the variation in reserve prices. Since auction reserve prices are set by the procurer before the auction, they should be indepen- dent from the identity of the winning seller. We estimate reserve prices as a function of the local market price, contract, procurer and time controls, and procurer-seller fixed effects. A procurer-seller pair is labeled as potentially corrupt if its pair fixed effect is significantly larger than the average procurer fixed effect. Despite their reserve price overpricing, corrupt sellers face less competition in auctions organized by procurers with whom they form a corrupt pair and have a higher probability of wining these auctions. Auctions won by corrupt pairs exhibit higher final contract prices, leading to considerable welfare losses. The detrimental effect of reserve price manipulation on final prices is mitigated by higher competition and fully offset by electronic auctions with sufficient competition.