Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, July 18, 2019

Assessment of Collusion Damages in First Price Auctions

M. Florencia Gabrielli, Conicet - UNCuyo and Manuel Willington, Escuela de Gobierno - Universidad Adolfo Ibáñez offer an Assessment of Collusion Damages in First Price Auctions.

ABSTRACT: In this paper we propose a structural method for estimating the efficiency and revenue losses associated with bidding rings in symmetric and asymmetric first-price auctions. It is based on the auction estimation literature (Guerre, Perrigne, and Vuong [2000]) and is consistent with damage assessment methodologies used in antitrust cases, in the sense that we build a but-for (competitive) scenario and then estimate the differences between the but-for scenario and the factual one. We show in a Monte Carlo exercise that our methodology performs very well in moderate size samples. We apply our methodology to California highway procurement data after first identifying a potential set of colluders using standard tests in the literature.

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