Coupling Effects of Economic, Industrial, and Geographical Factors on Collusive Bidding Decisions

Abstract

Collusive bidding has been a major concern for both antitrust authorities and clients because it can inflate winning prices to artificially high levels. Deciding to initiate such an illegal business competition is subject to external environmental factors (EEFs). Understanding the EEFs’ impacts on collusive bidding decisions allows institutional arrangements to encapsulate free and fair competition. Although previous studies have examined the EEFs separately, few have explored their synthesis in determining collusive bidding decisions. This study decomposed the EEFs into three categories: economic, industrial, and geographical (EIG), and detected their effects on collusive bidding decisions by using 254 collusive bidding cases gathered from the Chinese construction industry. Results of the data analysis indicated that as a key EEF, industrial competition has a positive effect on bidders’ collusive willingness and collusive team number. However, its impacts on collusive bid prices are negative. In addition, the coupling of economic development and industrial competition positively affects bidders’ collusive prices. These findings provide new insight into the essence of the EEFs and support the formulation of countermeasures to deter bidders from seeking a to-collude decision.