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  • October 2020
  • Article
  • Journal of Political Economy

Collusion in Markets with Syndication

By: John William Hatfield, Scott Duke Kominers, Richard Lowery and Jordan M. Barry
  • Format:Print
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Abstract

Markets for IPOs and debt issuances are syndicated, in the sense that a bidder who wins a contract may invite losing bidders to join a syndicate that together fulfills the contract. We show that in markets with syndication, standard intuitions from industrial organization can be reversed: Collusion may become easier as market concentration falls, and market entry may in fact facilitate collusion. In particular, price collusion can be sustained by a strategy in which firms refuse to join the syndicate of any firm that deviates from the collusive price. Our results thus can rationalize the apparently contradictory empirical facts that the market for IPO underwriting exhibits seemingly collusive pricing despite its low level of market concentration.

Keywords

Collusion; Antitrust; IPO Underwriting; Syndication; ＂Repeated Games＂; Markets; Game Theory

Citation

Hatfield, John William, Scott Duke Kominers, Richard Lowery, and Jordan M. Barry. "Collusion in Markets with Syndication." Journal of Political Economy 128, no. 10 (October 2020).

About The Author

Scott Duke Kominers

Entrepreneurial Management
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