Question

What is most interesting about auctions, bid-rigging, and other pricing schemes when it comes to economics?

Answer 1

Price fixing is an arrangement between rivals to raise, set or otherwise sustain the price at which they sell their products or services. There is no need for the competitors to agree to charge exactly the same amount, or for any competitor in a given industry to join the conspiracy. Price fixing can take several forms and any arrangement limiting price competition is in violation of the law

Bid rigging is a way in which conspiring competitors effectively raise prices where buyers often acquire goods or services from federal, state , or local governments by soliciting competing bids. Essentially, the competitors agree in advance who will submit the winning bid on a contract that is allowed through the competitive bid process. As with price fixing, all bidders don't need to participate in the conspiracy.

Under the law, the price-fixing and bid-rigging schemes are violations of the Sherman Act in themselves. This means that where such a collusive scheme has been established, it is not justifiable under the law by arguments or evidence that, for example, the agreed prices were reasonable, the agreement was necessary to prevent or eliminate price reductions or ruinous competition, or the conspirators were simply trying to ensure that each had a fair market share.