A Conceptual Framework for the Inclusion of Exogenous Factors into Collusive Bidding Price Decisions

Abstract

Bid riggers often are accused of colluding and violating competition law, but there are limited instruments with which antitrust authorities can detect them. In collusive bidding, bid riggers may consider the impacts of exogenous factors, including environmental and firm-related factors, on bidding prices. Knowing the impacts aids antitrust authorities in comprehending bid riggers’ response to changes in the external environment and finding an effective way to inhibit collusion. In this study, a conceptual framework is proposed to present the exogenous factors based on utility theory merged with collusion concepts. The proposed framework was verified using 177 collusive cases collected from the Chinese construction industry. It was found that the exogenous factors include economic development, geographic location, competition intensity, enterprise ability, and collusive ability. The results indicate that subject to the mediated role of economic development, the influence of competition intensity and enterprise ability on the price decisions are not independent. The research findings shed light on collusive bidders’ decision-making and will help antitrust authorities to develop countermeasures to crack down on collusion in the construction sector.