Essays in The Economics of Explicit Collusion
Open Access
- Author:
- Samkharadze, Lily
- Graduate Program:
- Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- May 15, 2012
- Committee Members:
- Robert Clifford Marshall, Dissertation Advisor/Co-Advisor
Robert Clifford Marshall, Committee Chair/Co-Chair
Edward James Green, Committee Member
Anthony Mark Kwasnica, Committee Member
Coenraad Arnout P Pinkse, Committee Member
Leslie M Marx, Special Member - Keywords:
- cartel
collusion
procurement
merger
monopolization
information disclosure - Abstract:
- Chapter 1 We document that many cartels, once they have achieved the concordant suppression of within cartel rivalry engage in dominant-firm conduct, while discordant cartels do not. We construct a model in which a firm that was not invited to join the cartel, or that chose to remain outside the cartel, can be eliminated by the cartel if the cartel turns out to be concordant, but not if the cartel turns out to be discordant. This dominant-firm conduct by a cartel can be an incremental source of profits for cartel members beyond the narrow suppression of within-cartel rivalry. This work has implications for the evaluation of competitive versus anticompetitive explanations for certain types of dominant-firm conduct. Chapter 2 Prior to federal antitrust and merger laws, when firms were largely unconstrained in their decision to either form a cartel or merge, many firms organized as cartels rather than merging. Procurement practices are affected by the nature of competition among suppliers, including mergers, and by uncertainty about whether suppliers are colluding.We show that the payoff to a cartel exceeds that of a merged entity in a procurement setting where a buyer that is dissatisfied with the bids of incumbent bidders can resolicit bids after qualifying a new entrant. A key benefit of cartel formation versus merger is that a cartel can take advantage of customer beliefs that the policing action of competition is still in place. Chapter 3 A common feature of most procurements is that if the bids are viewed as too high a buyer may make no award and re-auction the project at a later date. In practice, the highest bid that a buyer accepts is set based on the buyer’s own estimate of the project’s cost which may or may not be publicly released prior to bidding. I analyze the role of information disclosure in a two-period procurement model with the following information structure. The sellers' costs have both private and common components. The common component is known to all the sellers, but the buyer privately observes only the realization of a noisy signal which is correlated with the sellers' common cost component. In addition, the buyer is uncertain as to whether he faces a cartel or noncooperative sellers. I show that in this model the buyer can increase his expected payoff by following a policy of concealing the signal in the initial round of bidding. Intuitively, if the buyer’s signal is sufficiently correlated with the true costs, then through a policy of concealing his signal, the buyer can limit the incentives of a low cost cartel to represent itself as high cost. It is also shown that the disclosure of the signal is irrelevant for the buyer when collusion is not a possibility. Thus, nondisclosure of the buyer’s signal may be viewed as a tool to combat collusion.