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The Effect of Bid Rigging on Prices: A Study of the Highway Construction Industry

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Abstract

This paper examines the effect of multimarket contact in afirst price sealed bid government procurement auction market. It investigates whether bidprices in the highway construction industry are related to conditions that favor the formation of a cartel.Repeated contacts among firms are found to have a significantly positive effect on the winning low bidwhich leads to higher profit. Further, rivalry among few firms tends to exacerbate the multimarket effect.The results in this study additionally support the recent theoretical predictions that collusion isbetter sustainable during economic downturns.

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Authors and Affiliations

  1. Department of Economics, Florida Atlantic University, 220 SE 2nd Avenue, Fort Lauderdale, FL, 33301, U.S.A.

    Srabana Gupta

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  1. Srabana Gupta
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Gupta, S. The Effect of Bid Rigging on Prices: A Study of the Highway Construction Industry. Review of Industrial Organization 19, 451–465 (2001). https://doi.org/10.1023/A:1012568509136

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