Public Economics Commons^™

Single Bidders And Tacit Collusion In Highway Procurement Auctions, David R. Barrus, Frank A. Scott Jr.

Institute for the Study of Free Enterprise Working Papers

Collusion in auctions can take different forms, one of which is refraining from bidding. Such behavior may be overt or tacit.Certain aspects of highway procurement auctions facilitate collusive outcomes. We collect data on asphalt paving auctions conducted by the Kentucky Transportation Cabinet from 2005 to 2007. We analyze both the bid participation decision and the pricing decision. We include variables that affect firm’s’ costs as well as variables that capture competitive and strategic effects. Most importantly, we determine the potential service area of each asphalt plant and use that information to determine the potential bidders for each paving project. We …