Executive Summary Milk I 3-4-08

Executive Summary Milk I 3-4-08 - The Kentucky Milk Case...

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The Kentucky Milk Case Report on a Statistical Analysis of a Potentially Collusive Market Environment Stephanie Chu Marcie Malaj Briar Sangiuliano
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Table of Contents Introduction .............................................................................. 3 Market Shares .......................................................................... 3 Incumbency Rates ................................................................... 3 Bid Levels & Dispersion .......................................................... 4 Price Versus Cost/Distance .................................................... 4 Bid Sequence ........................................................................... 4 Comparison of Average Winning Bid Prices ......................... 5 Conclusion ............................................................................... 7 Appendix .................................................................................. 8 Chu, Malaj & Sangiuliano 2 05/08/2009 Kentucky Milk Case 2
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The Kentucky Milk Case Report on a Statistical Analysis of a Potentially Collusive Market Environment Between 1983 and 1991, Meyer and Trauth Dairies were the only two bidders in the market for school milk provisions in the Tri-county region of Kentucky, while the 11 other school districts showed a significantly higher number of bidders; this information suggests collusive activity between Meyer and Trauth. After inspection of the bids, data shows that the two dairies were in fact colluding with one another to submit close bids and make the company actions appear competitive. The summary of the results are as follows: 1. Market Shares % of Market Share 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Meyer 1983 Trauth 1983 Meyer 1984 Trauth 1984 Meyer 1985 Trauth 1985 Meyer 1986 Trauth 1986 Meyer 1987 Trauth 1987 Meyer 1988 Trauth 1988 Meyer 1989 Trauth 1989 Thomson- Glass 1989 Meyer 1990 Thompson- Glass 1990 Trauth 1990 Meyer 1991 Thompson- Glass 1991 Trauth 1991 Year % of Market Share Between 1984 and 1988, it is apparent that collusion occurred. The market share for Trauth and Meyer was consistent, where the total number of milk half-pints was nearly equally shared between two major competitors.
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