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Horizontal Practices: New Analysis of Collusion and Market Structure

Paper Session

Friday, Jan. 5, 2018 2:30 PM - 4:30 PM

Pennsylvania Convention Center, 203-A
Hosted By: Industrial Organization Society
  • Chair: Ginger Jin, University of Maryland

Missing Bids

Sylvain Chassang
,
New York University
Kei Kewai
,
University of California-Berkeley
Jun Nakabayashi
,
Kindai University
Juan Ortner
,
Boston University

Abstract

We document a novel pattern in bids from procurement auctions: winning bids tend
to be isolated. A missing mass of bids just above winning bids makes it a stage-game
protable deviation for bidders to bid higher. In plain terms, producers have incentives
to overcut. This unusual departure from stage-game best-response is a robust indicator
of collusion between bidders. In addition, it provides new insights on the mechanics of
collusive schemes.

The Competitive Effects of Information Sharing

John Asker
,
University of California-Los Angeles
Chaim Fersthman
,
Tel Aviv University
Jihye Jeon
,
Boston University
Ariel Pakes
,
Harvard University

Abstract

We investigate the impact of information sharing between rivals in a dynamic auction with asymmetric information. Firms bid in sequential auctions to obtain inputs. Their inventory of inputs, determined by the results of past auctions, are privately known state variables that determine bidding incentives. The model is analyzed numerically under different information sharing rules. The analysis uses the restricted
experience based equilibrium concept of Fershtman and Pakes (2012) which we refine to mitigate multiplicity issues. We find that increased information about competitors' states increases participation and inventories, as the firms are more able to avoid the intense competition in low inventory states. While average bids are lower, social welfare is unchanged and output is increased. Implications for the posture of antitrust regulation toward information sharing agreements are discussed.

Competition, Product Proliferation and Welfare: A Study of the United States Smartphone Market

Ying Fan
,
University of Michigan
Chenyu Yang
,
University of Rochester

Abstract

This paper studies (1) whether, from a welfare point of view, oligopolistic competition leads to too few or too many products in a market, and (2) how a change in competition affects the number and the composition of product offerings. We address these two questions in the context of the U.S. smartphone market. Our findings show that this market contains too few products and that a reduction in competition decreases both the number and variety of products. These results suggest that product choice adjustment may exacerbate the welfare effect of a merger.

Collusion through Coordination on Announcements

Joseph E. Harrington Jr.
,
University of Pennsylvania
Lixin Ye
,
Ohio State University

Abstract

Motivated by some recent collusive practices that do not seem to constrain the prices that sellers offer, a theory of collusion is developed based on interpreting firms' actions as announcements about cost. By coordinating their announcements, firms are able to produce supracompetitive prices by influencing buyers' conduct rather than constraining sellers' prices.
Discussant(s)
Paulo J. Somaini
,
Stanford University
Mark Satterthwaite
,
Northwestern University
Eugenio J. Miravete
,
University of Texas-Austin
Guofu Tan
,
University of Southern California
JEL Classifications
  • L1 - Market Structure, Firm Strategy, and Market Performance
  • L4 - Antitrust Issues and Policies