Collusion in Markets with Syndication

72 Pages Posted: 26 Jul 2017 Last revised: 26 Jun 2019

See all articles by John William Hatfield

John William Hatfield

University of Texas at Austin

Scott Duke Kominers

Harvard University

Richard Lowery

University of Texas-Austin

Jordan M. Barry

University of San Diego School of Law

Date Written: April 26, 2019

Abstract

Many markets, including markets for IPOs and debt issuances, are syndicated: each winning bidder invites competitors to join its syndicate to complete production. Using repeated extensive form games, we show that collusion in syndicated markets may become easier as market concentration falls, and that market entry may facilitate collusion. In particular, firms can sustain collusion by refusing to syndicate with any firm that undercuts the collusive price (and thereby raising that firm’s production costs). Our results can thus rationalize the paradoxical empirical observations that the IPO underwriting market exhibits seemingly collusive pricing despite low levels of market concentration.

Keywords: Collusion, Antitrust, IPO underwriting, Syndication, Repeated games

JEL Classification: D43, L13, G24, L4

Suggested Citation

Hatfield, John William and Kominers, Scott Duke and Lowery, Richard and Barry, Jordan, Collusion in Markets with Syndication (April 26, 2019). Harvard Business School Entrepreneurial Management Working Paper No. 18-009; San Diego Legal Studies Paper No. 18-349. Available at SSRN: https://ssrn.com/abstract=3007819 or http://dx.doi.org/10.2139/ssrn.3007819

John William Hatfield

University of Texas at Austin ( email )

Austin, TX 78712
United States

Scott Duke Kominers (Contact Author)

Harvard University ( email )

Rock Center
Harvard Business School
Boston, MA 02163
United States

HOME PAGE: http://www.scottkom.com/

Richard Lowery

University of Texas-Austin ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Jordan Barry

University of San Diego School of Law ( email )

5998 Alcala Park
San Diego, CA 92110-2492
United States

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