Collusion in Markets with Syndication

John William Hatfield; Scott Duke Kominers; Richard  Lowery; Jordan M. Barry

Article | Journal of Political Economy | Forthcoming

Collusion in Markets with Syndication

by John William Hatfield, Scott Duke Kominers, Richard Lowery and Jordan M. Barry

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;

Format: Print

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Citation:

Hatfield, John William, Scott Duke Kominers, Richard Lowery, and Jordan M. Barry. "Collusion in Markets with Syndication." Journal of Political Economy (forthcoming).

We prove a natural comparative static for many-to-many matching markets in which agents’ choice functions exhibit size-dependent discounts: reducing the extent to which some agent discounts additional partners leads to improved outcomes for the agents on the other side of the market, and worsened outcomes for the agents on the same side of the market. Our argument draws upon recently developed methods bringing tools from choice theory into matching.

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Collusion in Markets with Syndication

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