Not from Concentrate: Collusion in Collaborative Industries

67 Pages Posted: 23 Feb 2021 Last revised: 31 Jan 2022

See all articles by Jordan M. Barry

Jordan M. Barry

University of Southern California Gould School of Law

John William Hatfield

University of Texas at Austin

Scott Duke Kominers

Harvard University

Richard Lowery

University of Texas-Austin

Date Written: January 28, 2022

Abstract

The chief principle of antitrust law and theory is that reducing market concentration—having more, smaller firms instead of fewer, bigger ones—reduces anticompetitive behavior. We demonstrate that this principle is fundamentally incomplete.

In many industries, collaborating with rivals is important. Firms in such “Collaborative Industries” are interdependent, and they can use their interdependence to collude. Reducing market concentration does not change this dynamic, and thus does not prevent collusion. Worse, if smaller firms depend on collaboration more than larger ones do, reducing market concentration can actually encourage collusion.

Antitrust enforcers have observed that Collaborative Industries are more prone to collusion. Yet conventional economic models, and the antitrust laws and policies built upon them, do not reflect Collaborative Industries’ dynamics. Our findings thus have important implications for antitrust doctrine, how regulators choose and present cases, the public guidance that agencies issue, and the methods that regulators employ to fight collusion.

Keywords: Antitrust, antitrust law, antitrust theory, law and economics, collusion, collaboration, collaborative industries, regulation, game theory, repeated games, IPOs, initial public offerings, underwriters, real estate, real estate agents, realtors, syndicated markets, syndication, brokers

JEL Classification: K21, L41, L13, D43, L11

Suggested Citation

Barry, Jordan and Hatfield, John William and Kominers, Scott Duke and Lowery, Richard, Not from Concentrate: Collusion in Collaborative Industries (January 28, 2022). San Diego Legal Studies Paper No. 21-007, Available at SSRN: https://ssrn.com/abstract=3787280 or http://dx.doi.org/10.2139/ssrn.3787280

Jordan Barry (Contact Author)

University of Southern California Gould School of Law ( email )

699 Exposition Blvd.
Los Angeles, CA 90089
United States

John William Hatfield

University of Texas at Austin ( email )

Austin, TX 78712
United States

Scott Duke Kominers

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

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