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An Economic Analysis of Debarment

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Abstract
With a view to reducing the consequences of corruption in public procurement, many governments have introduced debarment of suppliers found guilty of corruption and some other forms of crime. This paper explores the market effects of debarment on public procurement. Debarment is found to make little difference in markets with high competition, while in markets with low competition it may deter corruption as long as firms value public procurement contracts in the future and there is a certain risk of being detected in corruption. On the other hand, debarment - when it works - has an anti-competitive effect, and this effect will contribute to facilitate collusion between suppliers. Debarment may work as a tool against collusion, but only if targeting one firm at the time (such as a ring-leader or the specific beneficiary when the collusion is detected) - and not all the members of a cartel. If designed with an understanding of the market mechanisms at play, debarment can deter both collusion and corruption, thus improving the results of public procurement. If so, most current debarment regimes need modification.

Suggested Citation

  • Auriol, Emmanuelle & Søreide, Tina, 2015. "An Economic Analysis of Debarment," Discussion Papers 2015/23, Norwegian School of Economics, Department of Business and Management Science.
    • Handle: RePEc:hhs:nhhfms:2015_023
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    File URL: http://hdl.handle.net/11250/300273
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    Cited by:

    1. Roberto Burguet & Juan José Ganuza & José Garcia Montalvo, 2016. "The microeconomics of corruption. A review of thirty years of research," Economics Working Papers 1525, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Emmanuelle Auriol & Erling Hjelmeng & Tina Søreide, 2023. "Corporate criminals in a market context: enforcement and optimal sanctions," European Journal of Law and Economics, Springer, vol. 56(2), pages 225-287, October.
    3. Lucas, David S. & Fuller, Caleb S. & Piano, Ennio E., 2018. "Rooking the state," International Review of Law and Economics, Elsevier, vol. 55(C), pages 12-20.
    4. Albano, Gian Luigi & Cesi, Berardino & Iozzi, Alberto, 2017. "Public procurement with unverifiable quality: The case for discriminatory competitive procedures," Journal of Public Economics, Elsevier, vol. 145(C), pages 14-26.
    5. Szerman, Christiane, 2023. "The employee costs of corporate debarment in public procurement," LSE Research Online Documents on Economics 125608, London School of Economics and Political Science, LSE Library.
    6. Cerrone, Claudia & Hermstrüwer, Yoan & Robalo, Pedro, 2021. "Debarment and collusion in procurement auctions," Games and Economic Behavior, Elsevier, vol. 129(C), pages 114-143.
    7. Tina Søreide & Kasper Vagle, 2022. "Settlements in corporate bribery cases: an illusion of choice?," European Journal of Law and Economics, Springer, vol. 53(2), pages 261-287, April.

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    More about this item

    Keywords

    Debarment; Corruption; Collusion; Procurement;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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