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Buyer resistance for cartel versus merger

Author

Listed:
  • Kumar, Vikram
  • Marshall, Robert C.
  • Marx, Leslie M.
  • Samkharadze, Lily

Abstract

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.

Suggested Citation

  • Kumar, Vikram & Marshall, Robert C. & Marx, Leslie M. & Samkharadze, Lily, 2015. "Buyer resistance for cartel versus merger," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 71-80.
  • Handle: RePEc:eee:indorg:v:39:y:2015:i:c:p:71-80
    DOI: 10.1016/j.ijindorg.2015.02.002
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    References listed on IDEAS

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    Cited by:

    1. Robert M. Feinberg, 2016. "Anti-cartel enforcement and subsequent mergers: state-level evidence for physician groups," Economics Bulletin, AccessEcon, vol. 36(1), pages 365-372.

    More about this item

    Keywords

    Collusion; Auctions; Procurements;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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