Vertical Collusion Research Articles

Hub-and-Spoke collusion in the port intelligence investment system: A case study of Shanghai Port

In the post-pandemic era, the maritime market has transcended traditional horizontal competition and collusion, giving rise to a new form of collaboration in both horizontal and vertical dimensions, known as hub-and-spoke collusion. This study provides a comparative analysis of competition and collusion strategies in the maritime industry from the perspective of port intelligence investment across five scenarios. The research findings suggest that hub-and-spoke collusion strategy can significantly enhance overall revenue in the shipping sector within a certain range. Unlike traditional horizontal and vertical collusion methods, hub-and-spoke collusion strategy operates more covertly and yields greater profits tending to occur within emerging or oligopolistic industries, the stability of which gradually increases with rising competitive pressure. However, excessive competition weakens its stability.

Vertical Collusion to Exclude Product Improvement*

A manufacturer of an established product repeatedly interacts with a retailer that can sell an inferior new product thereby improving it. The manufacturer's exclusionary strategy consists of a permanently below‐cost wholesale price and “vertical collusion” with the retailer to exclude via a future reward of a reduced fixed fee. The latter tool is available only in an infinite game. Although contracts include fixed fees, the retailer sells the new product more than what maximizes industry profits. Exclusive dealing or a vertical merger between the manufacturer of the established product and the retailer replicate the vertically integrated outcome and increase prices.

Grey Interest Chain Identification and Control Model for Government Investment Engineering Projects Based on Node Identification

In the bidding process of government investment engineering projects, collusion between the government and bidders occurs repeatedly, which seriously affects the quality of engineering projects and the effectiveness of the government investment. Therefore, it is necessary to analyze and discuss the collusion between the government and bidders in government investment engineering projects, so as to provide a healthy and sustainable environment for the government investment engineering bidding market. There are two main types of collusion in engineering bidding: horizontal collusion and vertical collusion, and this paper focuses on the vertical collusion process in the engineering bidding process. A conceptual framework of the grey interest chain based on three stages of benefit creation, benefit distribution, and benefit realization was established, 15 major nodes in the grey interest chain were identified, and a grey interest chain control model was constructed, which further identified and classified the nodes into four levels: key nodes, important nodes, general nodes, and unimportant nodes. Finally, through the application of the model in the case, measures such as establishing a cracking mechanism for grey resource integration, increasing the supervision of grey interest chain, and strengthening post-bid audit are proposed. Measures such as including the preparation of bidding documents into the work assessment system and entrusting consulting units or third parties to prepare bidding documents are proposed to establish a crack mechanism for grey resource integration. In the benefit distribution stage, the penalties for the government and the bidders can be appropriately increased, the responsibilities of enterprises and project leaders can be implemented in the system on a reciprocal basis, and a perfect reputation mechanism information can be established. At the stage of benefit realization, the bidding system should be improved and post-bid audit should be strengthened to increase the difficulty of grey benefit realization. This paper will provide a reference for the prevention and governance of vertical collusion in bidding and tendering.

Does big data help answer big questions? The case of airport catchment areas & competition

We develop algorithms to analyze Information and Communication Technologies (ICT) data in order to estimate individuals’ mobility at different spatial scales. Specifically, we apply the algorithms to delineate airport catchment areas in the United Kingdom’s Greater London region and to estimate ground access trip times from a very large ICT dataset. The spatial demand is regressed over demographic, socio-economic, airport-specific and ground access modal characteristics in order to determine the drivers of airport demand. Drawing on these insights, we develop a catchment area game inspired by Hotelling that analyzes the potential impact of collaboration between airports and airlines by integrating evidence of consumer behavior with producers’ financial data. We apply the game to a case study of two London airports with overlapping catchment areas for local residents. Our assessment of airline-airport vertical collusion and airport-airport horizontal collusion indicates that the former is beneficial to both producers and passengers. In contrast, whilst horizontal and vertical collusion is the equilibrium outcome in the analytic symmetric case, it is found to be less likely in the asymmetric case and the real-world, data-driven analysis, due to catchment area and cost asymmetries. Thus, such new datasets may enable regulators to overcome the long-standing information asymmetry issue that has yet to be resolved. Combining new data sources with traditional consumer surveys may provide more informed insights into both consumers’ and producers’ actions, which determines the need (or lack thereof) for regulatory intervention in aviation markets.

How to effectively control vertical collusion in bidding for government investment projects-Based on fsQCA method.

The impact of collusion during the bidding processes of Chinese government investment projects is a major concern in academic and policy circles, as collusion breeds corruption and destroys the credibility of governments. Furthermore, it negatively impacts successful project completion, leading to cost overruns and the illegitimate enrichment of colluding agents, regardless of the intended social benefits. Using data from 166 selected regional policy implementations as the research sample, this paper uses the fuzzy set qualitative comparative analysis method to conduct a group analysis of typical cases. The purpose of this study is to identify and better understand the cooperative regional policy implementation environments in China and to identify effective methods to improve the governance quality of collusion controls in construction investment project bidding processes. Five key control paths are identified, covering 94% of the cases. It is also found that in lower social collusion situations, reasonable market competition regulations can directly reduce collusive behavior. The research results will help the government to formulate more adaptive control policies and promote high-quality development of government investment projects.

Comprehensive Evaluation of the Tendency of Vertical Collusion in Construction Bidding Based on Deep Neural Network.

To effectively diagnose and monitor the vertical collusion in construction project bidding, this paper developed a comprehensive evaluation model with deep neural network and transfer learning. By this model, the collusion characteristics of bidders, tenderers, and bid evaluation experts were mined from limited data set hidden and collusion tendency was evaluated. Firstly, 18 evaluation indicators were established from literature review, court file summarization, typical case analysis, and expert consultation. Then, a comprehensive evaluation model was developed with the deep neural network and transfer learning. Finally, the model was trained and tested with the collected data set. The test results showed that the developed model achieved 87.3% identification accuracy in collusion tendency evaluation of different subjects.

Evaluation of the Effectiveness of Collusion Control Policy Implementation by BP Neural Network Based on Annealing Algorithm Optimization

Due to the national economic development form and social development demand, in recent years, the government has been vigorously promoting the control of government-enterprise collusion in the bidding process of government projects in order to promote the standardization of the market. How to predict the vertical collusion behavior under different internal and external environments has become an important research content. Although the prediction of individual behavior is difficult to achieve, the prediction of group behavior has certain possibilities. In this paper, we propose a method for predicting and evaluating the vertical collusion behavior of government investment project bidding based on BP neural network analysis optimized by an annealing algorithm. First, drawing on the traditional evaluation model, the evaluation index system of government-enterprise collusion behavior is constructed from five dimensions: internal environment, external environment, policy development, enforcement effort, and feedback channel. Secondly, a machine learning method based on BP neural network optimized by an annealing algorithm is introduced to evaluate the influence of the change of initial conditions on the bidding collusion behavior. This study has certain significance for government managers to discover the problems and causes in policy formulation, which in turn can support the government in further improving the policy utility.

CRITIC‐Based Vertical Collusion Control Quality Prediction Based on the Coupling and Coordination Degrees of Socioenvironmental and Public‐Investment Bidding Systems in China

Currently, in China, the bidding processes for government socioenvironmental projects face threats of collusion between officials and vendors. This study introduces a coupling and coordination degree‐measurement model to study the relationship between the quality of vertical collusion controls and the socioenvironmental system of China based on bidding data taken from 2006 to 2020. The coupling degree describes the socioeconomic influence felt between systems, and the coordination degree refers to their sustainable focused cooperation and mutual influence. The criteria importance through intercriteria correlation method was used to quantify these degrees. To smooth out periods of missing data, the autoregressive integrated moving average model was employed, and the first‐order, one‐variable, time‐series forecasting method was then used to project the trend to 2025. The results revealed that the quality of vertical collusion controls based on the degrees of coupling and coordination between external socioenvironmental and public investment systems ranged from 0.151 to 0.700. Dissonance was detected from 2006 to 2015, but the overall coupling degree has been on an upward trend, peaking in 2020. Currently, the quality of vertical collusion controls is in its primary coordination stage, although it is improving rapidly. From the projected years, both coupling and coordination degrees will enter an intermediate coordination stage by 2022, when the growth rate of the coupling degree is overtaken by that of the coordination degree, as long as active strategies are applied to harmonize the systems in terms of anticollusion measures.

Vertical collusion in the shipping container transport chain over the deregulation tariff of port authority

ABSTRACT This article investigates the impact of cost difference on vertical collusion between a container port and a liner from the perspective of a shipping container transport chain, taking the deregulation tariff of port authority into consideration. It develops a two-stage game model and then performs simultaneous and sequential games. A finding in this article is that the higher the cost difference between the two shipping container transport chains, the greater the possibility of vertical collusion between the container port and liner. Furthermore, the article found that in the case of an infinite repeated game, the stability of vertical collusion is not only subject to the cost difference but also affected by the terminal handling charge (THC) and collusive choice of counterpart.

BUSINESS COMPETITION IN IMPLEMENTATION GOVERNMENT TENDER

The Business Competition Supervisory Commission (KPPU) has the authority to examine and decide on alleged violations of business competition in tenders under Law No. 5 of 1999 concerning Prohibition of Monopolistic Practices. The results of the study of Case Verdict Number: 34 / KPPU-L / 2009 are that there are several facts that business actors have violated Article 22 of Law Number 5 of 1999 that fulfills elements of conspiracy, the form of conspiracy is vertical collusion and conspiracy horizontal. In Case Decision Number 34 / KPPU-L / 2009 it is shown that a violation of business competition has Elements that can determine that there is an unfair business practice, in this case it is stated that Reported I, Reported II, Reported III, Reported IV, Reported V, Reported VI was proven to have been legally and convinced to have carried out a tender conspiracy. The formulation of the problem in the research is an analysis of the authority of the KPPU and the elements of a tender conspiracy. The type of research that was used in this journal were the Normative Research Type, and the data collection technique used is the literature study

Vertical collusion

AbstractWe characterize collusion involving secret vertical contracts between retailers and their supplier—who are all equally patient (“vertical collusion”). We show such collusion is easier to sustain than collusion among retailers. Furthermore, vertical collusion can solve the supplier's inability to commit to charging the monopoly wholesale price when retailers are differentiated. The supplier pays retailers slotting allowances as a prize for adhering to the collusive scheme and rejects contract deviations. In the presence of competing suppliers, vertical collusion can be sustained using short‐term exclusive dealing.

Vertical collusion between airports and airlines: An empirical test for the European case

We develop a test for vertical collusion between airports and airlines in the case of two different scenarios. In the first scenario there is one airport and one airline; this intends to depict the case of airports that do not compete with any other one. In the second, we consider two competing airports and one airline that uses the airport as a base or a hub. In the case of non competing airports we find that gross margins are lower when there is vertical collusion. In the case of competing airports, we find that gross margins are equal when both pairs collude or do not collude. But in the case in which only one pair colludes, a merger between them brings a lower margin. We tested 36 pairs of airports–airlines in the case of non competing airports and we find evidence for vertical collusion with respect to: (i) main national carriers in small airports (ii) low cost carriers in secondary airports.

Airport and airlines competition: Incentives for vertical collusion

This paper develops a model of airport and airline competition in a three-stage game. We analyse incentives for vertical collusion between one airport and one airline that compete with another airport and another airline, by means of static and dynamic games. We find that incentives for collusion exist when airports and airlines have different market sizes and, under certain conditions, also when secondary airports and low cost airlines compete with main airports and full service airlines.

Collusion and the organization of delegated expertise

We study the optimal design of incentive contracts for experts in different collusion environments, and explore implications for the organization of delegated expertise. We consider a principal relying on experts to gather and report two signals about a project's value. The principal can have a single expert gather both signals or two experts gather one signal each. We show that absent collusion, the multiexpert organization dominates the single expert organization. However, this ranking is reversed when the experts can collude among themselves (horizontal collusion) and with the principal (vertical collusion).

Monopoly, Monopsony, and Vertical Collusion: Antitrust Policy and Professional Sports

Monopoly, Monopsony, and Vertical Collusion: Antitrust Policy and Professional Sports