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Maria Ostrovnaya 1, Elena Podkolzina 1
  • 1 National Research University Higher School of Economics, 20 Myasnitskaya Str., Moscow, 101000, Russian Federation

Electronic Auctions and Favoritism in Russian Public Procurement

2014. Vol. 18. No. 4. P. 586–619 [issue contents]
Since the 2000s electronic auctions have been actively used in public and private procurement in many countries. They are often organized by intermediaries – specialized e-plat­forms, which seem to raise price competition between companies through increased transparency and lower participation costs. Meanwhile, it is not clear yet to what consequences e-auctions lead, if an e-platform is corrupt. In this paper we examine how a corrupt e-platform affects favoritism in public procurement using a theoretical model of reverse outcry auction and e-auction. In both auction formats a public procurer can restrict participation of companies by setting contract requirements that all companies may not execute. In addition to this, in e-auction intermediary can block actions (i.e. bids) of companies. Manipulation of contract requirements and blocking bids provide an opportunity for public procurer and intermediary, respectively, to take bribes. We show that even if participation costs have no effect on the decision of companies to enter the auction, e-auction with a corrupt intermediary may lead to lower possibilities for favoritism than outcry auction. If the preferred bidder carries out low production costs, corruption of e-platform encourages favoritism. On the contrary, if the preferred bidder carries out high production costs and meets the strict requirements of the public procurer, incentives for favoritism and the size of the bribe may decrease. Thus, corruption of e-platform replaces the corruption of the public procurer and the society can benefit from it.

Citation: Ostrovnaya M., Podkolzina E. (2014) Elektronnye auktsiony i favoritizm v rossiyskikh gosudarstvennykh zakupkakh [Electronic Auctions and Favoritism in Russian Public Procurement]. HSE Economic Journal, vol. 18, no 4, pp. 586-619 (in Russian)
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