Title

Scoring and Cartel Discipline in Procurement Auctions

Author(s)

Juan Ortner Juan Ortner (Boston University)

Sylvain Chassang Sylvain Chassang (Princeton University)

Kei Kawai Kei Kawai (University of California Berkeley and& University of Tokyo)

Jun Nakabayashi Jun Nakabayashi (Kyoto University)

Abstract

Auctioneers suspecting bidder collusion often lack the formal evidence needed for legal recourse. A practical alternative is to design auctions that hinder collusion. Since Abreu et al. (1986), economic theory has emphasized imperfect monitoring as a constraint on collusion, but evidence remains scarce on whether: (i) information frictions meaningfully limit real-world collusion; and (ii) auctioneers can effectively exploit these frictions. Indeed, transparency concerns prevent the introduction of explicit randomness in auction design. We make progress on this issue by studying the impact of subjective scoring in auctions run by Japan’s Ministry of Land, Infrastructure, and Transportation. The adoption of scoring auctions significantly reduced winning bids in ways inconsistent with competition. Model-based inference suggests that the cartel’s dynamic obedience constraints were binding and tightened by imperfect monitoring. Subjective scoring can successfully leverage imperfect monitoring frictions to reduce the scope of collusion.

Creation Date

2025-05

Section URL ID

Paper Number

342

URL

https://gceps.princeton.edu/wp-content/uploads/2025/06/wp342_Chassang_scoring_cartels.pdf

File Function

Jel

D44

Keyword(s)

procurement, scoring, cartel discipline, imperfect monitoring

Suppress

false

Series

3