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Collusion in Markets with Syndication

Author

Listed:
  • John William Hatfield
  • Scott Duke Kominers
  • Richard Lowery
  • Jordan M. Barry

Abstract

Many markets are syndicated, including those for initial public offerings, club deal leveraged buyouts, and debt issuances; in such markets, each winning bidder invites competitors to join a syndicate to complete production. We show that in syndicated markets, collusion may become easier as market concentration falls and market entry may facilitate collusion. In particular, firms can sustain collusion by refusing to syndicate with any firm that undercuts the collusive price, thereby raising that firm’s production costs. Our results can thus rationalize the paradoxical empirical observations that many real-world syndicated markets exhibit seemingly collusive pricing despite low levels of market concentration.

Suggested Citation

  • John William Hatfield & Scott Duke Kominers & Richard Lowery & Jordan M. Barry, 2020. "Collusion in Markets with Syndication," Journal of Political Economy, University of Chicago Press, vol. 128(10), pages 3779-3819.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/709953
    DOI: 10.1086/709953
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    Citations

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    Cited by:

    1. Dimitris Christopoulos & Stefan Koeppl & Monika Köppl-Turyna, 2022. "Syndication networks and company survival: evidence from European venture capital deals," Venture Capital, Taylor & Francis Journals, vol. 24(2), pages 105-135, April.
    2. Bittner, Christian & Fecht, Falko & Pala, Melissa & Saidi, Farzad, 2022. "Information transmission between banks and the market for corporate control," Discussion Papers 29/2022, Deutsche Bundesbank.
    3. Busaba, Walid Y. & Restrepo, Felipe, 2022. "The “7% solution” and IPO (under)pricing," Journal of Financial Economics, Elsevier, vol. 144(3), pages 953-971.
    4. Do, Jihwan, 2022. "Cheating and compensation in price-fixing cartels," Journal of Economic Theory, Elsevier, vol. 200(C).
    5. BOUCKAERT, Jan & VAN MOER, Geert, 2022. "When rivals team up in procurement: does it distort competition?," Working Papers 2022001, University of Antwerp, Faculty of Business and Economics.
    6. Yue Cai, 2021. "Measuring Market Power in the IPO Underwriter," Working Papers 2108, Waseda University, Faculty of Political Science and Economics.

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