Buyer resistance for cartel versus merger

Kumar, Vikram, Marshall, Robert C., Marx, Leslie M. and Samkharadze, Lily (2015) Buyer resistance for cartel versus merger. International Journal of Industrial Organization, 39. pp. 71-80. ISSN 0167-7187

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Procurement practices are affected by uncertainty regarding suppliers' costs, the nature of competition among suppliers, and uncertainty regarding possible collusion among suppliers. Buyers dissatisfied with bids of incumbent suppliers can cancel their procurements and resolicit bids after qualifying additional suppliers. Recent cartel cases show that cartels devote considerable attention to avoiding such resistance from buyers. We show that in a procurement setting with the potential for buyer resistance, the payoff to firms from forming a cartel exceeds that from merging. Thus, firms considering a merger may have an incentive to collude instead. We discuss implications for antitrust and merger policy.

Item Type: Article
Uncontrolled Keywords: collusion,auctions,procurements
Faculty \ School: Faculty of Social Sciences > Norwich Business School
UEA Research Groups: Faculty of Social Sciences > Research Centres > Centre for Competition Policy
Depositing User: Pure Connector
Date Deposited: 10 May 2016 10:00
Last Modified: 19 Apr 2023 23:58
DOI: 10.1016/j.ijindorg.2015.02.002

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