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Free keywords:
debarment, collusion, procurement auctions, sanctions
JEL:
C92 - Laboratory, Group Behavior
JEL:
D03 - Behavioral Microeconomics: Underlying Principles
JEL:
D44 - Auctions
JEL:
K21 - Antitrust Law
JEL:
K42 - Illegal Behavior and the Enforcement of Law
Abstract:
This article presents the first experiment exploring the impact of debarments - the exclusion of colluding bidders - on collusion in procurement auctions. We find that debarments and their most common alternative, fines, reduce collusion and bids relative to a market with no sanction. The deterrent effect of debarments increases in their length. However, shorter debarments reduce efficiency and increase the bids of non-debarred bidders. This suggests that debarments that are too lenient may trigger tacit collusion among the bidders who remain in the market, thereby facilitating the very behavior they aim to deter.
