Corruption in multidimensional procurement auctions under asymmetry

We examine corruption in first and second-score procurement auctions with two asymmetric bidders. We assume that an agent, who is known to be corrupt with some exogenously known probability, asks for a bribe from one of two bidders and promises to manipulate bids in return. Using a symmetric quasi-linear scoring rule, we show that the agent approaches the weaker bidder for a bribe for higher levels of bidder asymmetry in both auction formats. Our numerical simulations suggest that the procurer prefers the first-score auction when the agent colludes with the stronger bidder in the second-score auction. If the weaker bidder is favored, on the other hand, the buyer switches to the second-score auction when the probability of corruption is high. This is due to the agent's limited ability to manipulate bids in favor of the weaker bidder in the second-score auction. Finally, neither auction mechanism is efficient in the presence of corruption.

Automated summary

This study examines corruption in first and second-score procurement auctions with two asymmetric bidders. It is found that the agent tends to approach the weaker bidder for a bribe as the level of bidder asymmetry increases in both auction formats. Numerical simulations suggest that the procurer prefers the first-score auction when the agent colludes with the stronger bidder, while switching to the second-score auction when the weaker bidder is favored and the corruption probability is high. Neither auction mechanism is efficient in the presence of corruption.