Construction Industry and Competition Policy in Japan

Abstract

This study sheds light on the operation of Japanese competition policy by focusing on a public procurement bid-rigging case in the construction industry. The analysis demonstrates a firm-entry effect on the construction market and shows that the bidding and winning price levels before an investigation by the Japan Fair Trade Commission were higher than they were after the investigation. According to these results, price levels in the bid-rigging period were approximately 6% higher than with competition, and the result is statistically significant. Firm entry is associated with an approximate 2% price reduction, an effect that comes from introducing competition into a coordinated setting.