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Buyer Resistance for Cartel versus Merger *
BibTeX
@MISC{Kumar_buyerresistance,
author = {Vikram Kumar and Robert C Marshall and Leslie M Marx and Lily Samkharadze and Alexei Alexandrov and Hans Friederiszick and Ed Green and Barry Ickes and Bill Kovacic and Vijay Krishna and Mike Meurer and Chip Miller and Lars Persson and Alexander Raskovich and Keith Waehrer and Greg Werden},
title = {Buyer Resistance for Cartel versus Merger *},
year = {}
}
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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, and does so by a magnitude that can offset efficiency gains from a merger. Thus, firms considering a merger may have an incentive to collude instead. We discuss implications for antitrust and merger policy.
