Ohio Milk Case

2123 Words9 Pages
Table of Contents I. Introduction ............................................................................................................................ 2 II. Ohio School Milk Market ................................................................................................... 2 III. Collusive Bidding Behaviour ........................................................................................... 3 IV. Economic Principles ........................................................................................................... 5 V. Conclusion .............................................................................................................................. 7 VI. References ............................................................................................................................. 9 1 I. Introduction There are many different procurement markets in the world. Public sectors often use the system of auctions in order to ensure competition within these markets. Buyers announce their need of a specific good and the date of auction whereby the supplier with the smallest bid gains the contract. Suppliers need a lot of information beforehand in order to be able to react quickly to their competitors’ bids. The system of auctions however often encourages the formation of illegal cartels and price agreements. In the case at hand 600 schools in the area of Ohio demanded school milk. Possible suppliers were all dairies willing and able to supply school milk. During the 1980s the State of Ohio decided to investigate the biddings for the school milk contracts. Thirteen companies were accused and officially found guilty of uncompetitive behaviour such as price-fixing and the foundation of cartels. Later, several experts, such as Porta, Zona and

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