Abstract: We study entry and bidding in procurement auctions where contracts are awarded to the bid closest to a trimmed average bid. We characterize equilibrium under competition and show that it is weak due to strong incentives for cooperation. We present statistical cooperation tests motivated by how a coalition bids to manipulate the mechanism. We show that our tests perform well in a validation dataset with known cartels. We also use them to investigate cooperation in a larger dataset where cartels are suspected but not known. We detect several suspiciously cooperative groups with potentially substantial, positive effects upon auctioneers' revenues.

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