Iossa, Elisabetta, Loertscher, Simon, Marx, Leslie M. and Rey, Patrick (2020) Collusive market allocations. TSE Working Paper, n. 20-1084, Toulouse

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Abstract

Collusive schemes by suppliers often take the form of allocating customers or
markets among cartel members. We analyze incentives for suppliers to initiate
and sustain such a collusive schemes in a repeated procurement setting. We show
that, contrary to some prevailing beliefs, staggered (versus synchronized) purchasing does not make collusion more difficult to sustain or initiate. Buyer defensive
measures include synchronized rather than staggered purchasing, first-price rather
than second-price auctions, more aggressive or secrete reserve prices, longer contract
lengths, withholding information, and avoiding observable registration procedures.
Inefficiency induced by defensive measures is an often unrecognized social cost of
collusive conduct.