Auction is a sufficient condition of competition? Сollusion is in the market of bidding rings

G. Yusupova () and O. Kiseleva ()
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O. Kiseleva: NationalResearchUniversity Higher School of Economics

Journal of Modern Competition, 2014, issue 3, 20-35

Abstract: Antitrust legislation of many countries admits horizontal agreements between market participants as illegal per se not only in case of price fixing, market sharing, but also in case of bid-riggings. This paper presents a review and an academic assessment of market participants behavior at auctions by bidding. Such behavior creates incentives to collude and to sustain a collusion but with some features which are suitable for auctions. These suitable features for auctions are in detail described in the paper of R. Preston Mcafee and John Mcmillan «Bidding Ring». In order to collude, the bidders must resolve their asymmetric-information problem: they must have some way of selecting a winner and a winning bid. So the main characteristic of auction by bidding is asymmetric-information. The knowledge is non-uniform distributed between the parties to the contract: the seller does not know a demand of auction by bidding participants. Otherwise the seller would know what price it is worth to set.In our paper we used these features and the conditions of collusion’ sustainability to give academic assessment of market participants behavior at the auctions by bidding. We showed that the cartel sustainability in the conditions of e-auction corresponds to balance of profit and expected fine imposed in the case of cartel detection but not corresponds to discount factor as an indicator of«cartel sustainability». The cases of Russian antitrust practice which are devoted to the auction by bidding in the pharmaceutical market gave us an opportunity to show how the firms use the price strategies to keep the prices at the rate which give them to earn monopoly profits.

Keywords: auction; collusion; competition; antitrust legislation (search for similar items in EconPapers)
Date: 2014
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