Ohio Milk Case

Analysis of the Ohio School Milk Case Underlying Economic Principles

Maastricht University School of Business and Economics Maastricht, 2 December 2009Huynh, M. P. ID number: I 6003147Study: Economics Course code: EBC1010Group number: 31Tutor name: RJD Wilkinson Language tutor name: RJD Wilkinson Writing Assignment: Main paper |

Table of contents

1. Introduction …………………………………………………………………….........……3

2. Market structure for school milk in Ohio…........……………………………….................3

3. Characteristics that facilitate collusion....…………………………………..……………...4

4. Evidence manifesting the collusion in the Ohio milk case……………….………...……..5

5. Economic instability of cartels.............................................................................................6

6. Economic impact of collusive behavior on competition......................................................7

7. Conclusion............................................................................................................................8

References..................................................................................................................................9

1. Introduction

All along bid rigging is a serious problem which mirrors collusion when firms secretly join agreements to minimize a competitive response and maximize joint profits. By the UK and European Competition policies this behavior is considered to be illegal and is punished by large fines from thousands to millions ECU and terms of imprisonment. Even so the challenge here for antitrust economists is to distinguish between tacit and explicit collusion. In other words, if the evidence is not clear and direct enough, it is often very difficult to figure out if firms have fixed prices or have otherwise rigged the market outcome.

Among other things collusive behavior occurs in school milk auctions and this paper examines and focuses on the collusion in the...