'Sweet deals': State-owned enterprises, corruption and repeated contracts in public procurement

- Stable relations between public customers and suppliers are considered.
- Private suppliers have small price differences between repeated and one-time contracts.
- The price differences between SOEs and private suppliers are insignificant for e-auctions.
- Contracts with state-owned suppliers are overpriced for non-transparent procedures.
- Repetition of contracts with SOEs enhances overpricing for non-transparent procedures.

We show how a price analysis of stable relations between customer and supplier in the public procurement of homogeneous goods can help differentiate opportunistic from honest behaviour among economic agents. We consider two types of stable relations: repeated procurements and connections based on the state ownership of suppliers. On the basis of a large dataset on the procurement of granulated sugar in Russia from 2011 to 2013, we find that for private suppliers, prices of repeated contracts were lower compared to one-time deals when procured through more transparent procedures and higher when procured through non-transparent procedures. For non-transparent procedures, we observe significant overpricing of contracts with state-owned suppliers compared to private suppliers, especially in the case of repeated contracts, whereas for competitive e-auctions, there is only a small difference between the contract prices of state-owned suppliers and private suppliers.