Buyer resistance for cartel versus merger

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

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

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.

Original languageEnglish (US)
Article number2210
Pages (from-to)71-80
Number of pages10
JournalInternational Journal of Industrial Organization
Volume39
DOIs
StatePublished - Mar 2015

All Science Journal Classification (ASJC) codes

  • Industrial relations
  • Aerospace Engineering
  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)
  • Strategy and Management
  • Industrial and Manufacturing Engineering

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