DETECTING BID-RIGGING CARTELS WITH DESCRIPTIVE STATISTICS

The paper shows that descriptive statistics, used as screens, capture the effect of bid rigging in the distribution of the bids. The bid-rigging cartel studied in this paper negatively affected the variance of the bids as illustrated by the coefficient of variance and the kurtosis statistic. Furthermore, it cleverly manipulated the differences between bids to secure that the designated bidder from the cartel won the contract. Such cover-bidding mechanism produced asymmetry in the distribution of the bids illustrated by the relative distance, the skewness statistic, and the percentage difference between the first and second lowest bids. The descriptive statistics capture the change in the statistical pattern of the distribution of the bids between periods of collusion and competition. Moreover, the bid rotation screen shows that the behavior of firms changed radically between the cartel and post-cartel periods. Finally, the paper discusses policy implications for competition agencies wishing to set up a detection method for screening procurement markets.