Economics Brown Bag Seminar - Leslie Marx (Duke University)

Title: Collusion via Market Allocation (joint work with Elisabetta Iossa, Simon Loertscher, and Patrick Rey)

Abstract: Colluding suppliers regularly organize their collusive conduct based on an allocation of customers or  markets among the cartel members. We analyze incentives for suppliers to initiate and sustain a collusive customer or market allocation in a repeated procurement setting. We show that, contrary to some prevailing beliefs, the presence of staggered (versus synchronized) purchasing does not make collusion more difficult to sustain or initiate. Buyers facing  the threat  of collusion may prefer synchronized rather than staggered purchasing, first-price rather than second-price auctions, more aggressive reserve prices, secret reserves, longer contract lengths, and avoiding observable registration procedures. Some buyer defensive measures increase inefficiency, which is an often unrecognized social cost of collusive conduct.