Corruption and auctions

Menezes, Flavio M. and Monteiro, Paulo Klinger (2006) Corruption and auctions. Journal of Mathematical Economics, 42 1: 97-108. doi:10.1016/j.jmateco.2005.04.002

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Author Menezes, Flavio M.
Monteiro, Paulo Klinger
Title Corruption and auctions
Journal name Journal of Mathematical Economics   Check publisher's open access policy
ISSN 0304-4068
Publication date 2006
Sub-type Article (original research)
DOI 10.1016/j.jmateco.2005.04.002
Volume 42
Issue 1
Start page 97
End page 108
Total pages 12
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Language eng
Abstract 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.
Keyword Mathematics, Interdisciplinary Applications
Social Sciences, Mathematical Methods
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Excellence in Research Australia (ERA) - Collection
School of Economics Publications
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Citation counts: TR Web of Science Citation Count  Cited 9 times in Thomson Reuters Web of Science Article | Citations
Scopus Citation Count Cited 16 times in Scopus Article | Citations
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Created: Mon, 13 Aug 2007, 16:02:49 EST