"Measuring and Addressing Market Power issues in the Desludging Market in Senegal"
https://docs.google.com/spreadsheets/d/1g90jQGNmK_ypYHakykPUb0G1EMgGX5hNcOIa-WwXLsg/edit?usp=sharing
Abstract
We test for collusion in the market for sanitation services in Dakar, Senegal by instituting real-time auctions and testing the impact of randomized differences in invitations to bid and other design elements. We ran 4,117 procurement auctions with 103 desludging
operators. We find that the auctions are successful in instigating increased competition: the auctions reduce prices, particularly for those who would be high cost in the general market. Consistent with predictions of competitive auctions, differences in input
costs are passed through to the consumer and more invitations to the auctions result in lower prices.
Participation in the auctions remains low at 17%. We use evidence from the platform's randomization in invitations to bid in the auctions to measure the extent to which participation decreases and bids increase when desludgers from the same garages are invited
to the same auctions. Members of some garages collude through reducing participation when other members of their garage are invited to the same auction, but this effect is only present in the fiscal year of the auction data. This allows their peers who do
bid in the auctions to face weakened competition and bid higher. Operators who are part of the association of desludgers have lower costs and higher markups in the auctions. Member of the association pass through less of their transportation costs to the consumer
and submit higher bids controlling for the garages to which they belong. Competition increases over time through the auctions, and collusion appears to dissipate in the second year of the auctions.