Tender value and the extent and form of corruption in public procurements : a game theory approach
Published in CEU ETD, 2016
The main focus of this paper is to analyze the relationship between tender size and corruption in public procurements. Based on a slightly modified model developed by Mizoguchi and Van Quyen (2014), this paper establishes a theoretical framework for the analysis of the corrupt behaviour of competing firms under uncertainty in the information available to the opponent firm. Utilizing the developed framework, this paper aims to answer why high value, specific tenders are more exposed to corruption than average or low value tenders. A main result of the analysis is that clear competition requires a high probability of repetition and high discount factor, with the former being rather rare in case of large tenders. An additional goal of the paper is to determine why bid rigging is a more prevalent form of corruption than kickbacks. The results suggest that bid rigging is characteristic to procurements with higher probability of repetition, thus they can be observed more often.
Recommended citation: O. Kiss. Tender value and the extent and form of corruption in public procurements : a game theory approach, CEU ETD 2016. https://sierra.ceu.edu/record=b1199610