Excel Analysis & Report - Kentucky Milk Case
Budget: $10 – $30 USD
PURPOSE OF PAPER: Many products and services are purchased by governments, cities, and businesses on the basis of scaled bids, and contracts are awarded to the lowest bidders. This process works extremely well in competitive markets, but it has the potential to increase the cost of purchasing if the markets are noncompetitive or if collusive practices are present. An investigation that began with a statistical analysis of bids in the Florida school milk market led to the recovery of more than $33,000,000 from dairies that had conspired to rig bids there. The investigation spread quickly to other states, and to date, settlements and fines from dairies exceed $100,000,000 for school milk bid rigging in 20 other states. This case concerns a school milk bid rigging investigation in Kentucky.
Each year, the Commonwealth of Kentucky invites bids from dairies to supply half-pint containers of fluid milk products for its school districts. The products include who white milk, low-fat while milk, and low-fat chocolate milk. In 13 school districts in northers Kentucky, the suppliers (dairies) were accused of "price-fixing" that is conspiring to allocate the districts so that the "winner" was predetermined. Because these districts are in Boone, Campbell, and Kenton counties, the geographic market they represent is designated as the "tri-county" market. Over a 9-year period, two dairies—Meyer Dairy and Trauth Dairy—were the only bidders on the milk contracts in the school districts in the tri-county market. Consequently, these two companies were awarded all the milk contracts in the market. (In contrast, a large number of different dairies won the milk contracts for the school districts in the remainder of the norther Kentucky market—called the "surrounding" market.) The Commonwealth of Kentucky alleged that Meyre and Trauth conspired to allocate the districts in the tri-county market. To date, one of the dairies (Meyer) has admited guilt, while the other (Trauth) steadfastly maintains its innocence.
The Commonwealth of Kentucky maintains a database on all bids received from the dairies competing for the milk contracts. Some fo these date have been made available to you to analyze to determine whether there is empirical evidence of bid collusion in the tri-county market. The data, saved in the milk file, are described in detail below. Some background information on the data and important economic theory regarding bid collusion is also provided. Use this information to guide your analysis. Prepare a professional document that presents the results of your analysis and gives your opinion regarding collusion.
Each year, the Commonwealth of Kentucky invites bids from dairies to supply half-pint containers of fluid milk products for its school districts. The products include who white milk, low-fat while milk, and low-fat chocolate milk. In 13 school districts in northers Kentucky, the suppliers (dairies) were accused of "price-fixing" that is conspiring to allocate the districts so that the "winner" was predetermined. Because these districts are in Boone, Campbell, and Kenton counties, the geographic market they represent is designated as the "tri-county" market. Over a 9-year period, two dairies—Meyer Dairy and Trauth Dairy—were the only bidders on the milk contracts in the school districts in the tri-county market. Consequently, these two companies were awarded all the milk contracts in the market. (In contrast, a large number of different dairies won the milk contracts for the school districts in the remainder of the norther Kentucky market—called the "surrounding" market.) The Commonwealth of Kentucky alleged that Meyre and Trauth conspired to allocate the districts in the tri-county market. To date, one of the dairies (Meyer) has admited guilt, while the other (Trauth) steadfastly maintains its innocence.
The Commonwealth of Kentucky maintains a database on all bids received from the dairies competing for the milk contracts. Some fo these date have been made available to you to analyze to determine whether there is empirical evidence of bid collusion in the tri-county market. The data, saved in the milk file, are described in detail below. Some background information on the data and important economic theory regarding bid collusion is also provided. Use this information to guide your analysis. Prepare a professional document that presents the results of your analysis and gives your opinion regarding collusion.