Buyer resistance for cartel versus merger

Kumar, Vikram; Marshall, Robert C.; Marx, Leslie M.; Samkharadze, Lily

doi:10.1016/j.ijindorg.2015.02.002

Cited by 12 publications

(4 citation statements)

References 29 publications

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“…The possibility of deterring bidding rings through defensive measures has also been extensively studied. Our findings related to auction formats and information disclosure are broadly consistent with the literature (e.g., Klemperer, 2002;Kovacic et al, 2006;Marshall and Marx, 2009;Kumar et al, 2015;Marshall, Meurer and Marx, 2014;Marx, 2017), and those on the ability of aggressive reserves to deter bid rigging echo existing results (e.g., Graham and Marshall, 1987;Thomas, 2005;McAfee and McMillan, 1992;Kirkegaard, 2005;Larionov, 2021). 10 However, much less work has been done on the costs of implementing defensive measures and the optimal deployment of defensive measures taking into account both the benefits and costs of doing so, 11 which is the focus of our paper.…”

supporting

confidence: 89%

Coordination in the Fight against Collusion

Iossa,

Loertscher,

Marx

et al. 2024

American Economic Journal: Microeconomics

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While antitrust authorities strive to detect, prosecute, and thereby deter collusive conduct, entities harmed by that conduct are also advised to pursue their own strategies to deter collusion. The implications of such delegation of deterrence have largely been ignored, however. In a procurement context, we find that buyers may prefer to accommodate rather than deter collusion among their suppliers. We also show that a multimarket buyer, such as a centralized procurement authority, may optimally deter collusion when multiple independent buyers would not, consistent with the view that “large” buyers are less susceptible to collusion. (JEL D21, D43, D44, L12, L14)

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supporting

confidence: 89%

Coordination in the Fight against Collusion

Iossa,

Loertscher,

Marx

et al. 2024

American Economic Journal: Microeconomics

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“…Alternatively, firms may seek the pretense of competitive markets. Indeed, customers may resist high prices if they do not discern the policing force of competition (Kumar, Marshall, Marx, and Samkharadze, ). In this case, a clandestine cartel may be able to take advantage of customer beliefs that competition is still in place, and firms could enjoy lower buyer resistance, especially in procurement contracts.…”

Section: Discussionmentioning

confidence: 99%

The effects of global leniency programs on margins and mergers

Dong

Massa

Žaldokas

2019

The RAND J of Economics

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In a cross‐country study, we investigate how staggered passage of national leniency programs from 1990–2012 has affected firms’ margins and merger activity. We find that these programs, which give amnesty to cartel conspirators that cooperate with antitrust authorities, reduced the gross margins of the affected firms. However, firms reacted to new regulations by engaging in more mergers that had negative effects on downstream firms. Our results imply that although these programs were generally effective, their full potential was mitigated by mergers that substitute for cartels, and that a strong merger review process might be a prerequisite for strengthening anti‐collusion enforcement.

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“…Kumar et al (2013) show that for 45% of cartels reported by the EC between 2001-2010, there were mergers between the former cartelists in following years, and that this was twice as likely in markets where buyers were fragmented rather than concentrated. They use this to motivate their theoretical modelling of the choice between collusion and merger when faced with buyer resistance.…”

Section: Introductionmentioning

confidence: 95%

Mergers after Cartels: How Markets React to Cartel Breakdown

Davies¹,

Ormosi²,

Graffenberger³

2015

The Journal of Law and Economics

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Most literature assessing the effectiveness of competition policy focuses on short term impacts, ignoring the likelihood that firms and market mechanisms may take some time to respond to policy interventions. This paper adopts a more dynamic perspective in the context of cartel detection by analysing subsequent developments in market structures through merger. With data for a sample of 84 EC cartels, the paper employs a novel application of recurrent event survival analysis to establish that cartel breakdown is indeed typically followed by intensive merger activity. This is most likely for cartels which had been detected via leniency applications and where concentration was relatively lower. The paper also shows that in most markets where mergers do not occur, the post-cartel structure is already consistent with potential dominance, and in a number of those where it is not, the mergers move the market in that direction. Surprisingly few post-bust mergers were investigated by the competition authority (in this case the European Commission), and this appears to be because many were individually small, but cumulatively had significant impact on concentration. Contact Details:Stephen Most literature assessing the e¤ectiveness of competition policy focuses on short term impacts, ignoring the likelihood that …rms and market mechanisms may take some time to respond to policy interventions. This paper adopts a more dynamic perspective in the context of cartel detection by analysing subsequent developments in market structures through merger. With data for a sample of 84 EC cartels, it employs a novel application of recurrent event survival analysis to establish that cartel breakdown is typically followed by intensive merger activity. This is most likely for cartels which had been detected via leniency applications and where concentration was relatively lower.The paper also shows that in most markets where mergers do not occur, the post-cartel structure is already consistent with potential dominance, and in a number of those where it is not, the mergers move the market in that direction.Surprisingly very few post-cartel mergers were intervened by the competition authority, and this appears to be because many were individually small, but cumulatively had signi…cant impact on concentration.

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Buyer resistance for cartel versus merger

Cited by 12 publications

References 29 publications

Coordination in the Fight against Collusion

Coordination in the Fight against Collusion

The effects of global leniency programs on margins and mergers

Mergers after Cartels: How Markets React to Cartel Breakdown

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