Corruption and renegotiation in procurement

• Authors: Leandro Arozamena, Federico Weinschelbaum and Juan-José Ganuza.
• Economics Letters, Vol. 255 , Article 112496, September 2025.

A government agency uses a procurement auction to select a supplier for an incomplete contract that may be renegotiated after awarding. We study a case where a firm can bribe the monitoring agent to gain preferential treatment during renegotiation. If bribery occurs, the corrupt firm bids more aggressively and has a higher chance of winning. The likelihood of corruption increases when contracts are less complete, the corrupt firm’s cost is more likely to be similar to her rivals’, and when there are fewer competitors.