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Do buyer groups facilitate collusion?

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  • Normann, Hans-Theo
  • Rösch, Jürgen
  • Schultz, Luis Manuel

Abstract

We explore whether buyer groups, in which firms legally purchase inputs jointly, facilitate collusion in the product market. In a repeated game, abandoning the buyer group altogether or excluding single firms from them constitute more severe credible threats, hence, in theory buyer groups facilitate collusion. We run several experimental treatments in a three-firm Cournot framework to test these predictions, and we also explore the impact communication has on buyer groups. The experimental results show that buyer groups lead to lower outputs when groups can exclude single firms. Communication is identified as a main factor causing collusive product markets. --

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Bibliographic Info

Paper provided by Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) in its series DICE Discussion Papers with number 74.

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Date of creation: 2012
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Handle: RePEc:zbw:dicedp:74

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Keywords: buyer groups; cartels; collusion; communication; experiments; repeated games;

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