Collusive Market Allocations

58 Pages Posted: 8 May 2020

See all articles by Elisabetta Iossa

Elisabetta Iossa

University of Rome Tor Vergata; IEFE Bocconi University; Centre for Economic Policy Research (CEPR)

Simon Loertscher

University of Melbourne - Department of Economics

Leslie M. Marx

Duke University - Fuqua School of Business, Economics Group

Patrick Rey

Toulouse School of Economics; Centre for Economic Policy Research (CEPR)

Date Written: April 2020

Abstract

Collusive schemes by suppliers often take the form of allocating customers or markets among cartel members. We analyze incentives for suppliers to initiate and sustain such a collusive schemes in a repeated procurement setting. We show that, contrary to some prevailing beliefs, staggered (versus synchronized) purchasing does not make collusion more difficult to sustain or initiate. Buyer defensive measures include synchronized rather than staggered purchasing, first-price rather than second-price auctions, more aggressive or secrete reserve prices, longer contract lengths, withholding information, and avoiding observable registration procedures. Inefficiency induced by defensive measures is an often unrecognized social cost of collusive conduct.

Keywords: Coordinated effects, sustainability and initiation of collusion, synchronized vs staggered purchasing

JEL Classification: D44, D82, L41

Suggested Citation

Iossa, Elisabetta and Loertscher, Simon and Marx, Leslie M. and Rey, Patrick, Collusive Market Allocations (April 2020). CEPR Discussion Paper No. DP14563, Available at SSRN: https://ssrn.com/abstract=3594184

Elisabetta Iossa (Contact Author)

University of Rome Tor Vergata ( email )

Via Columbia n.2
Rome, 00133
Italy

IEFE Bocconi University ( email )

Via Roentgen 1
Milan, Milan 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Simon Loertscher

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Leslie M. Marx

Duke University - Fuqua School of Business, Economics Group ( email )

Box 90097
Durham, NC 27708-0097
United States

Patrick Rey

Toulouse School of Economics ( email )

2 Rue du Doyen-Gabriel-Marty
Toulouse, 31042
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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