H:direct-defendants-null — The frequent-loser ranking does not discriminate direct CADE defendants¶
A loser-side screen built from persistent zero-win participation should fail when used as a generic cartel-membership detector: direct CADE defendants typically include the designated winners of the rotation, who are not zero-win firms. A null AUC against direct defendants is therefore part of the design — it supports the interpretation that the ranking carries loser-side scope, not membership scope.
Intuition (plain-language)
Direct CADE defendants in procurement cartels are typically the winners of the rotation, not the systematic losers. A loser-side screen — built on persistent zero-win participation — cannot rank winners, and the data confirm this (AUC ≈ 0.49, indistinguishable from random). The null is the predicted finding under the loser-side scope. Far from being a failure, the null defines what the screen claims to do (rank cover-bidders) and what it doesn't claim to do (identify ringleaders). This is the anti-claim that disciplines the rest of the paper.
Evidence strength: Strong. AUC against 47 direct CADE defendants = 0.491 [0.461, 0.520]; indistinguishable from random and stable across raw, OOF, and temporal-holdout regimes. D4 mechanistic check: only 14.9% (7/47) of direct defendants are always-losers; median win rate 0.261 vs 0.086 for cobidders (Mann–Whitney p < 0.05). The null is the predicted finding under the loser-side scope.
Theory¶
The cartel theory underlying the loser-side construction \citep{marshall2012economics,clark2021collusion} predicts heterogeneous roles: winners take the contract, cobidders manufacture competition. A participation-intensity score over zero-win firms cannot rank winners by construction. If the score did discriminate direct defendants, it would either be picking up volume rather than role allocation, or the underlying cartel theory would not be operative.
Prediction¶
AUC of the frequent-loser score against direct CADE defendants ≈ 0.50 (random); it should not reach the levels obtained against cobidders.
Competing prediction¶
Generic-detector reading. If the FL score had general predictive power for cartel membership, AUC against direct defendants would be substantially above 0.50, undermining the loser-side scope interpretation.
Case evidence¶
Direct CADE defendants in 2009–2019 procurement-cartel adjudications include firms identified as designated winners or coordinators in the legal record. The cobidder set is constructed excluding direct defendants by design — see §2.3 of the manuscript.
Empirical test¶
- Outcome: direct-defendant indicator (1 if firm is a direct CADE defendant).
- Variation: position in the FL stratum vs other firms in BEC.
- Specification: AUC of
FL14andlog(1+tenders_count)over the full firm panel, with direct defendants as the positive class. - Identification: same as H:cobidder-concentration, but with a different positive label.
Data requirements and limitations¶
Requires CADE × BEC CNPJ-root link. Limitation: the test is constructive — it asks whether the score fails on a target it was not designed to detect. A null result is the predicted finding under the loser-side scope.
Evidence¶
| Analysis | Bearing | Status | Key takeaway |
|---|---|---|---|
| AN-007 (direct-defendant AUC) | Direct | done | AUC = 0.491 [0.461, 0.520] — random |
| AN-018 (D4 winner-heavy) | Supports | done | 14.9% of direct defendants are always-losers; median win rate 0.261 |
| AN-014 (leakage audit) | Supports | done | Direct-defendant AUC stays at 0.51 across raw/OOF/temporal — null is regime-invariant |
Open tests¶
- Decomposition of direct-defendant pool into roles (declared winner, coordinator, other) and AUC by role.
- Sensitivity to alternative direct-defendant definitions.