Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, July 31, 2018

AKKA/LAA, Coty, Hoffmann La Roche II and Others: A Survey of Cases at the Intersection between Competition Law and IP Law in the Past Year

Sophie Lawrance, Edwin Bond and Matthew Hunt recap AKKA/LAA, Coty, Hoffmann La Roche II and Others: A Survey of Cases at the Intersection between Competition Law and IP Law in the Past Year.

ABSTRACT: This Survey reviews EU competition law developments involving consideration of intellectual property (‘IP’) rights in the year to October 2017.

July 31, 2018 | Permalink | Comments (0)

Is Blockchain the Death of Antitrust Law? The Blockchain Antitrust Paradox

Thibault Schrepel, University Paris 1 Panthéon-Sorbonne asks Is Blockchain the Death of Antitrust Law? The Blockchain Antitrust Paradox.

ABSTRACT: To this day, the legal system has been very useful in providing trust and reducing uncertainty, or at least, in eliminating the need to worry about trust by providing an alternate remedy. But some costs remain so to represent ourselves as reliable and blockchain may reduce them to a smaller level.

In the meantime, the very nature of this technology raises fundamental questions for competition law. With this paper, our first ambition is to contribute to the literature by portraying the challenges on unilateral practices. Because blockchain is decentralized, anonymous and immutable, multiple questions do in fact arise regarding the detection of practices as well as the identification of perpetrators. We show that some practices are de facto more likely to be implemented, but they are yet to be identifiable.

This article further aims to contribute to the literature by questioning our current rules and how the law can fit into the technology. And indeed, for technical reasons, some remedies cannot be used to prevent the development of anti-competitive practices implemented through the blockchain. We will address what should be the focus for competition authorities and regulators in this regard. Meanwhile, they must observe a strict regulatory humility so as not to prevent the emergence of blockchain and to use it as an excuse for regulating all the practices that are perpetrated on it despite having a real competitive effect — what we call the “blockchain excuse.”

But in the end, one question arises as follows: is blockchain the death of antitrust law? Should it be? Answering them today is not easy as blockchain is still prone to drastic evolution, but some initial answers are to be provided nonetheless. In order to do so, this paper proceeds in three parts. The first details how unilateral practices can be implemented on blockchain and further establish a risk map. The second part focuses on the challenges for enforcers and presents a new theory entitled “regulatory infiltration.” The last part questions the legitimacy of competition law in the face of this technology - the “blockchain antitrust paradox” - and the need to decentralize competition authorities.

July 31, 2018 | Permalink | Comments (0)

How Hard is it to Maximise Profit? Evidence From a 19-th Century Italian State Monopoly

Carlo Ciccarelli,University of Rome, Tor Vergata - Faculty of Economics, Gianni De Fraja, University of Nottingham; Universita' di Roma; Centre for Economic Policy Research (CEPR), and Silvia Tiezzi, University of Siena - Department of Economics and Statistics ask How Hard is it to Maximise Profit? Evidence From a 19-th Century Italian State Monopoly. Worth downloading!

ABSTRACT: In this paper we study the ability of the 19-th century Italian government to choose profit maximising prices for a multiproduct monopolist. We use very detailed historical data on the tobacco consumption in 62 Italian provinces from 1871 to 1888 to estimate a differentiated product demand system. The demand conditions and the legal environment of the period made this market as close to a textbook monopoly as is practically possible. The government’s stated aim for this industry was profit maximisation: since at the time tobacco revenues constituted between 10 and 15 percent of the revenues for the cash-strapped government, the stated aim was very likely the true one. Cost data for the nine products suggest that the government was not wide off the mark: the tobacco prices were “not far” from those dictated by the standard monopoly formulae for profit maximisation with interdependent demand functions.

July 31, 2018 | Permalink | Comments (0)

Monday, July 30, 2018

IEEE Patent Policy Revisions: An Empirical Examination of Impact

Kirti Gupta, Qualcomm, Inc. and Georgios Effraimidis, Qualcomm, Inc. offer IEEE Patent Policy Revisions: An Empirical Examination of Impact.

ABSTRACT: In February 2015, the Institute of Electrical and Electronics Engineers-Standards Association (IEEE-SA) -- one of the largest Standards Development Organizations (SDOs) -- adopted highly controversial changes to its intellectual property rights (IPR) policy. Specifically, the IEEE-SA introduced a specific definition of Fair, Reasonable and Non-Discriminatory (FRAND) licensing terms. The updated policy rules and the position of the Department of Justice (DoJ) -- stated in a Business Review Letter (BRL) -- have attracted much discussion from academic scholars and industry practitioners.

The aim of this paper is to explore how the new patent policy has impacted different aspects of standards development within IEEE. Particularly, our analysis focuses on the IEEE 802 LAN/MAN Standards Committee (IEEE 802 LMSC), whose Working Groups (WGs) have been responsible for the design and development of widely used wireless technologies such as Wi-Fi and Ethernet. The first part of the analysis examines the submission pattern of Letters of Assurances (LoA), i.e., documents outlining the declaration of patents potentially essential to the standard (commonly referred to as Standard Essential Patents (SEPs)) and terms under which the submitter is willing to license its SEPs. We examine LoA submissions before and after the implementation of the new policy within the 802.11 WG, which covers the Wi-Fi technology. Next, we analyze how the comment resolution process (CRP), that is, the process of resolving comments made by 802.11 voters has changed after the policy update. More specifically, we investigate whether there is a delay in the approval process of 802.11 standards. Finally, we examine how the number of submitted Project Authorization Requests (PARs), or documents that trigger the development or revision of a standard by defining the scope and requirements for a new technical project across all IEEE 802 WGs, has changed after the policy update. PARs can be used as a proxy of new activity related to the development of standards. 

The empirical findings suggest a decline in LoAs with several SEP holders reluctant to license under the new IPR policy terms. More importantly, uncertainty on implementers’ side has increased, as new standards have been approved under the presence of negative and/or missing LoAs, and other standards are being developed under this “mixed bag” of LoAs. The CRP analysis reveals that the first two rounds of the process last on average longer after the policy change. Such a finding implies that the 802.11 balloting process has become more time consuming, which in turn results in a (potential) delay of approval/publication of standards. We also find that the number of new projects initiated (or PARs) in the IP-intensive IEEE standards (namely the 802 WGs) have decreased, suggesting a potential slowdon of the growth rate of innovation after the policy change.

July 30, 2018 | Permalink | Comments (0)

Keep It: Maintaining Competition in the Privacy Debate

Noah Phillips (FTC) has a new speech on Keep It: Maintaining Competition in the Privacy Debate.

July 30, 2018 | Permalink | Comments (0)

Job opportunities at the Center for the Protection of Intellectual Property (CPIP)

The Center for the Protection of Intellectual Property (CPIP) at Antonin Scalia Law School, George Mason University, is growing.  We are currently accepting applications for several positions.

First, CPIP is looking to fill an Assistant Director position. The Assistant Director will work on research and writing on a variety of legal, policy and academic topics, as well as assist the professors and thought-leaders in CPIP’s community of scholars on their research and writing, among other duties.  We are seeking someone with a J.D. degree (or equivalent advanced degree or experience) and a solid understanding of intellectual property law and policy, with a primary focus on patent law and policy.

In addition to Assistant Director, CPIP is also seeking qualified individuals for a Programs Coordinator and Programs Assistant. They will assist with several aspects of CPIP’s administration, event planning and execution of its many programs. 

Please feel free to share these opportunities with friends and colleagues who may be interested in working at CPIP, and please let us know directly of anyone you think would be a good fit for CPIP.

The complete position postings and application information are here:

Assistant Director: https://jobs.gmu.edu/postings/43433

 

Assistant Director, CPIP

jobs.gmu.edu

Assistant Director, CPIP The Center for the Protection of Intellectual Property (CPIP) at Antonin Scalia Law School, George Mason University, is dedicated to the scholarly analysis of intellectual property rights and the technological, commercial, and creative innovation they facilitate. CPIP explores how stable and effective property rights in innovation and creativity can foster successful and flourishing individual lives and national economies. George Mason University has a strong institutional commitment to the achievement of excellence and diversity among its faculty and staff, and strongly encourages candidates to apply who will enrich Mason’s academic and culturally inclusive environment. Through a wide array of academic and public policy programming, CPIP brings together scholars, industry leaders, inventors, creators, and policymakers to examine foundational questions and current controversies concerning patents, copyrights, and other intellectual property rights. Ultimately, CPIP seeks to promote

 

Programs Coordinator: https://jobs.gmu.edu/postings/43401

 

Program Coordinator, CPIP

jobs.gmu.edu

Program Coordinator The Center for the Protection of Intellectual Property (CPIP) is dedicated to the scholarly analysis of intellectual property rights and the technological, commercial, and creative innovation they facilitate. CPIP explores how stable and effective property rights in innovation and creativity can foster successful and flourishing individual lives and national economies. Through a wide array of academic and public policy programming, CPIP brings together scholars, industry leaders, inventors, creators, and policymakers to examine foundational questions and current controversies concerning patents, copyrights, and other intellectual property rights. Ultimately, CPIP seeks to promote a healthy academic discussion, grounded in rigorous scholarship, and a well-informed public policy debate about the importance of intellectual property. CPIP is looking for a Program Coordinator to join our team. Reporting to the Director of Operations, the Programs Coordinator will support CPIP’s event planning

 

Programs Assistant: https://jobs.gmu.edu/postings/43425

 

Program Assistant, CPIP

jobs.gmu.edu

Program Assistant The Center for the Protection of Intellectual Property (CPIP) is dedicated to the scholarly analysis of intellectual property rights and the technological, commercial, and creative innovation they facilitate. CPIP explores how stable and effective property rights in innovation and creativity can foster successful and flourishing individual lives and national economies. Through a wide array of academic and public policy programming, CPIP brings together scholars, industry leaders, inventors, creators, and policymakers to examine foundational questions and current controversies concerning patents, copyrights, and other intellectual property rights. Ultimately, CPIP seeks to promote a healthy academic discussion, grounded in rigorous scholarship, and a well-informed public policy debate about the importance of intellectual property. CPIP is looking for a Program Assistant to join our team. Reporting to the Director of Operations, the Programs Assistant will support CPIP’s programs and adminis



July 30, 2018 | Permalink | Comments (0)

The Effective Public Enforcement of the Prohibition of Anti-Competitive Agreements: Why Do Undertakings in the Netherlands Appeal?

Annalies Outhuijse, University of Groningen, Faculty of Law examines The Effective Public Enforcement of the Prohibition of Anti-Competitive Agreements: Why Do Undertakings in the Netherlands Appeal?

ABSTRACT: The national competition authorities (NCAs) have an important role in the European enforcement of antitrust cases since 2004 thereby making the success of this enforcement largely dependent on the effectiveness of the NCA’s enforcement. An analysis of the antitrust enforcement practices of different Member States raises doubts as to whether national enforcement is effective in every Member State. The public law enforcement of the prohibition of anti-competitive agreements in the Netherlands is, for example, characterised by the high proportion of fining decisions of the Dutch competition authority which are challenged and annulled in court, which obstructs effective enforcement. The fact that the percentage of decisions appealed is much higher than in many other areas of law in the Netherlands and the fact that not all other Member States experience such high rates of appeal – as will be shown in section 2 – justifies questioning what motivates undertakings in the Netherlands to file an appeal after receiving a cartel fine from the competition authority. This contribution answers this question on the basis of interviews conducted with fourteen lawyers who regularly represented undertakings fined for anti-competitive behaviour in the last fifteen years. Although the answer seems simple, since the fines and the likelihood of successful appeal are high, this research demonstrates that also reasons other than the fining decision itself influence the decision to file an appeal. The article starts with a brief introduction of the actors involved in the enforcement of competition law in the Netherlands, and an overview of litigation statistics for the Netherlands and nine other EU Member States. The interviews and reasons for appeal are then discussed and placed in a theoretical framework. Finally, the data provided by the lawyers is verified by an analysis of recent Dutch cartel cases and conclusions are drawn.

July 30, 2018 | Permalink | Comments (0)

George Stigler on His Head: The Consequences of Restrictions on Competition in (Bank) Regulation

Prasad Krishnamurthy, U.C. Berkeley School of Law studies George Stigler on His Head: The Consequences of Restrictions on Competition in (Bank) Regulation.

ABSTRACT: Bank regulation used to be riddled with price, product, entry, and location restrictions. These restrictions were intended to prevent the recurrence of crises, such as those of the 1930s and 1940s. Over time, however, regulatory acquiescence to technological and institutional innovation undermined their ability to limit competition. An intellectual turn toward valorizing competition also hastened their demise. George Stigler, in particular, provided a trenchant critique of all such regulation as the product of pure rent seeking by private industry.

This Article revisits the role of such restrictions on competition in banking. On the one hand, the public choice account of these restrictions as the outcome of private rent seeking is essentially true. On the other hand, their unintended historical result was to limit banks’ risk-taking incentives and to coopt banks into preventing regulatory arbitrage. Viewed from this perspective, these restrictions provide an important legal, political, and economic (LPE) model for how limits on competition could usefully complement current bank regulation. This model is one in which, to some extent, regulation facilitates rather than frustrates cartel formation in order to maintain a more stable equilibrium.

July 30, 2018 | Permalink | Comments (0)

Friday, July 27, 2018

The Case for Global Best Practices in Antitrust Procedural Fairness

D. Daniel Sokol (University of Florida) makes The Case for Global Best Practices in Antitrust Procedural Fairness.

ABSTRACT: Procedural fairness and its two component parts, transparency and due process, are paramount to a well-functioning antitrust/competition law system. Due process and transparency help to shape not merely the process but the substance of antitrust investigations and cases. They are bedrocks of the functioning of the legal system and offer legitimacy to given competition authority. Strong procedural fairness safeguards forces parties to debate only the merits of decisions and not the procedural inputs of how decisions were derived due to failures in due process or a lack of transparency. 

Procedural fairness concerns in antitrust have captured headlines for global mergers, cartel investigations and abuse of dominance cases. Across jurisdictions, parties involved in antitrust matters have raised concerns regarding procedural fairness issues in antitrust. These concerns have grown over time as competition authority emphasis has been placed on global mergers and conduct investigations. Additionally, issues of procedural fairness have remained central in the policy community as practitioner and academic conferences raise the importance of such issues in the competition law context. 

The lack of effective procedural fairness impairs effective competition law and policy. It also makes it more difficult for businesses to plan effectively because of the risk involved in antitrust enforcement that is based not on the particular conduct in question but on the uncertainty due to uneven enforcement. The deleterious effects are more far reaching than any individually badly decided case as lack of procedural fairness threatens the legitimacy of the entire competition policy system. This hurts consumer welfare.

This chapter explores the nature of procedural fairness issues in global antitrust. It explains the justifications for procedural fairness and the drivers for why such concerns have become significant in antitrust. Then, the chapter explores global antitrust institutions to understand if and how global best practices are possible for antitrust procedural fairness. The chapter concludes with advocacy of an approach that combines elements of hard law through free trade agreements and soft law through the OECD and ICN and through an informal "coalition of the willing" in ways that are complementary.

July 27, 2018 | Permalink | Comments (0)

Retail Discrimination in Search Markets

Maarten Janssen, University of Vienna studies Retail Discrimination in Search Markets.

ABSTRACT: This paper analyses the incentives of manufacturers to discriminate between exante symmetric retailers who compete for consumers with different search cost. By discriminating, a manufacturer indirectly screens searching consumers, creates more retail competition, increases its profits, but lowers consumer welfare. Low-cost retailers sell to a disproportionate share of low search cost consumers, providing strong incentives to compete; high-cost retailers also lower margins given their smaller customer base. For wholesale price discrimination to be an equilibrium outcome, some form of commitment is necessary. Legislation requiring sales at the recommended retail price serves as such a commitment device, making consumers worse off.

July 27, 2018 | Permalink | Comments (0)

Are Supermarkets Squeezing Small Suppliers? Evidence from Negotiated Wholesale Prices

Carlos Noton, Dept of Industrial Engineering and Andrés Elberg, Universidad Diego Portales ask Are Supermarkets Squeezing Small Suppliers? Evidence from Negotiated Wholesale Prices.

ABSTRACT: Conventional wisdom is that big‐box retailers squeeze the profits of small suppliers. Underlying this belief is the assumption that relative market size is the primary source of bargaining leverage. Using actual wholesale prices, we study profit‐sharing between large retailers and suppliers of different size. We find that the median supplier earns 42% of the channel surplus, and that some very small suppliers attain a share of the channel surplus close to that of the largest supplier (about 68%). Using a Nash bargaining model, we find that small suppliers can gain bargaining leverage by maintaining a base of loyal customers.

July 27, 2018 | Permalink | Comments (0)

Piracy Versus Monopoly in the Market for Conspicuous Consumption

Michael Mandler, University of London, Royal Holloway College - Department of Economics examines Piracy Versus Monopoly in the Market for Conspicuous Consumption.

ABSTRACT: When luxury purchases signal the incomes of buyers, a monopoly will deliver signals efficiently. If in contrast competitors sell counterfeit copies of luxury goods at low prices, consumers will have to buy larger quantities or higher qualities to transmit the same signals, which wastes resources. Competition does maximal harm when entrants produce indistinguishable replicas of existing luxury goods since prices will fall the furthest. The choice of which goods should deliver signals presents a trade‐off: goods with a large gap between marginal cost and the price a monopoly would charge signal efficiently but those large gaps increase the reward to counterfeiting.

July 27, 2018 | Permalink | Comments (0)

Thursday, July 26, 2018

Do Agency Contracts Facilitate Upstream Collusion?

Yoshifumi Hino, Vietnam National University (VNU) - Vietnam-Japan University, Susumu Sato, University of Tokyo - Graduate School of Economics, and Yusuke Zennyo, Graduate School of Business Administration, Kobe University ask Do Agency Contracts Facilitate Upstream Collusion?

ABSTRACT: This paper studies whether the agency contract facilitates upstream collusion as compared to the wholesale contract. To this end, we first develop an infinitely repeated game with a monopoly platform and multiple manufacturers. We derive the critical discount factors, above which the upstream collusion can be sustained, for each contract. The analysis shows that, without platform competition, the critical discount factor is higher under the agency contract than under the wholesale contract, which indicates that the agency contract does not facilitate the upstream collusion, because the monopoly platform has no incentive to foster the collusion among manufacturers. By contrast, in the extended model with competing platforms, the agency contract does facilitate the upstream collusion. This is because, with the platform competition, upstream collusion under the agency contract works as a coordination device to ease the platform competition, leading the platforms to accept it. Our analysis provides an important policy implication such that the agency contract itself is not anticompetitive, but should be regulated when there exists the platform competition.

July 26, 2018 | Permalink | Comments (0)

17th Annual AAI Energy Roundtable Energy Markets, Infrastructure, and Policy: Competition Issues and Priorities

17th Annual AAI Energy Roundtable

Energy Markets, Infrastructure, and Policy:
Competition Issues and Priorities

 

Thursday, September 20, 2018

1 p.m. - 5 p.m.

American Public Power Association in Arlington, VA

AAI marks its 17th Annual Energy Roundtable "Energy Markets, Infrastructure, and Policy-Competition Issues and Priorities" by gathering experts in antitrust and regulation from government, industry, advocacy, and academia to discuss major competition policy issues involving electricity and energy. 

The half-day roundtable will focus on three major areas of discussion, each facilitated by two expert industry and topic discussion leaders. Each one-hour session will tee up the issue, present major stakeholder and enforcement perspectives, and then open the discussion to the roundtable participants.  

Agenda
1:00 - 1:15 p.m.
Convene and Introductions

1:15 - 2:15 p.m.
Topic 1: Grid "Resiliency" Policy - What it Means for Competition and Consumers


2:15 - 2:30 p.m. 
Break

2:30 - 3:30 p.m.
Topic 2: FERC's Approach to Assessing Market Power - Standards, Empirics, and Implications

3:30 - 3:45 p.m.
Updates and Announcements - Promoting Energy Competition Advocacy

3:45 - 4:45 p.m.
Topic 3: Keeping Up With Vertical Competition Issues - Mergers, Codes of Conduct, and the Pipeline Certification Case Study

Discussion leaders will be announced in the coming weeks.  Seating is limited.

Register

July 26, 2018 | Permalink | Comments (0)

How the Source of the Entrant's Advantage Limits Entry‐Deterring Tying

Ken Corts (U Toronto) has a new paper on How the Source of the Entrant's Advantage Limits Entry‐Deterring Tying.

ABSTRACT: I revisit a simple model of entry‐deterring tying—example 1 from Whinston's (1990) seminal paper—but allow the potential entrant to have either a cost advantage or a willingness‐to‐pay (WTP) advantage relative to the incumbent. I show that, compared to the usual case in which the potential entrant is cost‐advantaged, tying is less effective against an entrant with a WTP advantage because an entrant with a large WTP advantage may be able to induce the buyer to buy both the tied bundle and the entrant's product. I also show that tying but failing to deter entry can be less costly when facing an entrant with a WTP advantage than when facing an entrant with a cost advantage. For a firm facing uncertainty about, for example, the entrant's entry costs, this makes tying a more attractive entry deterrence strategy against a WTP‐advantaged entrant. These results shed light on the important policy question of which markets are most likely to be susceptible to entry‐deterring tying.

July 26, 2018 | Permalink | Comments (0)

Debarment and Collusion in Procurement Auctions

Claudia Cerrone, Max Planck Institute for Research on Collective Goods, Yoan Hermstrüwer, Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Bonn - Department of Law, and Pedro Brito Robalo, Max Planck Institute, Bonn examine Debarment and Collusion in Procurement Auctions.

ABSTRACT: This paper explores the impact of debarment as a deterrent of collusion in first-price procurement auctions. We develop a procurement auction model where bidders can form bidding rings, and derive the bidding and collusive behavior under no sanction, debarment and fines. The model's predictions are tested through a lab experiment. We find that debarment and fines both reduce collusion and bids. The deterrent effect of debarment increases in its length. However, the debarment of colluding bidders reduces effciency and increases the bids of non-debarred bidders. The latter suggests that the market size reduction resulting from debarment may trigger tacit collusion.

July 26, 2018 | Permalink | Comments (0)

Wednesday, July 25, 2018

Competition in a digital economy is a new frontier - the first two of Caron Beaton-Wells' podcasts in her new series are up

Join Caron Beaton-Wells, Professor in Competition Law at the University of Melbourne, to tackle what it means to participate as a competitor, consumer or citizen in a digital economy and society.

Featuring regular cut-through interviews with leading thinkers, movers and shakers, Competition Lore is a podcast series that engages us all in a debate about the transformative potential and risks of digitalised competition.

July 25, 2018 | Permalink | Comments (0)

Does Price Competition Damage Healthcare Quality?

Anne-Fleur Roos, Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE), Eddy van Doorslaer, Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management, Owen O'Donnell, Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE), Frederik Schut, Erasmus School of Health Policy & Management (ESHPM), and Marco Varkevisser, Erasmus University Rotterdam (EUR) ask Does Price Competition Damage Healthcare Quality?

ABSTRACT: One of the reasons why regulators are hesitant about permitting price competition in healthcare markets is that it may damage quality when information is poor. Evidence on whether this fear is well-founded is scarce. We provide evidence using a reform that permitted Dutch health insurers and hospitals to freely negotiate prices for elective procedures. Unlike previous research that has relied on indicators of the quality of urgent treatments, we take advantage of the plausible absence of selection bias in our setting to identify the effect on quality of non-acute hip replacements. Using administrative data on all admissions to Dutch hospitals, we find no evidence that increased exposure to price competition reduces quality measured by readmission rates, despite the lack of publicly available information on this outcome. In fact, there is evidence of a temporary, positive impact on quality. Our estimated null effect over the full post-liberalization period is robust.

July 25, 2018 | Permalink | Comments (0)

What Do We Know About Algorithmic Tacit Collusion?

Ai Deng, Bates White Economic Consulting; Advanced Academic Programs, Johns Hopkins University asks What Do We Know About Algorithmic Tacit Collusion?

ABSTRACT: The past few years have seen many legal scholars and antitrust agencies expressing interest in and concerns with algorithmic collusion. In this paper, I survey and draw lessons from the literature on Artificial Intelligence and on the economics of algorithmic tacit collusion. I show that a good understanding of this literature is a crucial first step to better understand the antitrust risks of algorithmic pricing and devise antitrust policies to combat such risks.

July 25, 2018 | Permalink | Comments (0)

Debarment and Collusion in Procurement Auctions

Claudia Cerrone, Max Planck Institute for Research on Collective Goods, Yoan Hermstrüwer, Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Bonn - Department of Law, and Pedro Brito Robalo, Max Planck Institute, Bonn model Debarment and Collusion in Procurement Auctions.

ABSTRACT: This paper explores the impact of debarment as a deterrent of collusion in first-price procurement auctions. We develop a procurement auction model where bidders can form bidding rings, and derive the bidding and collusive behavior under no sanction, debarment and fines. The model's predictions are tested through a lab experiment. We find that debarment and fines both reduce collusion and bids. The deterrent effect of debarment increases in its length. However, the debarment of colluding bidders reduces effciency and increases the bids of non-debarred bidders. The latter suggests that the market size reduction resulting from debarment may trigger tacit collusion.

July 25, 2018 | Permalink | Comments (0)