The Outsider and Sunk Cost Effects on 'Dango' in Public Procurement Bidding: An Experimental Analysis.

Abstract

This paper presents the result of experiments for finding some insight into an effect of the new bidding system in Japanese public construction works procurement on bidders' collusion, which is called 'dango'. We focused on an effect of the entry of an outsider who is not a dango member. The main conclusion of the experiments is that an outsider, a subject who is not allowed to communicate with other subjects, has a robust effect to prevent other subjects from colluding and to make the winning price decrease considerably.CONSTRUCTION ; PRICES ; BIDDING