Corruption thrives in procurement auctions, leading to inefficiency and unfair advantages.
The article explores corruption in procurement auctions with two bidders of different strengths. A corrupt agent asks for bribes from bidders to manipulate bids. The agent targets the weaker bidder more when there is a bigger gap in bidder strength. The buyer prefers the first-score auction if the agent colludes with the stronger bidder, but switches to the second-score auction if the weaker bidder is favored and corruption is likely. However, both auction types are inefficient when corruption is present.