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Competition Matters
The Informed Purchaser
12/3/2014
From time to time, you may encounter terms or concepts unique to antitrust issues, competition, and schemes to exploit purchasers. Here are a few relevant terms and definitions:
· Inelastic demand: This occurs when the need for a good or service does not vary with a change in price. Examples of products with inelastic demand are gasoline, prescription medications, or other necessities.
· Homogeneous/homogeneity: These are goods, products, and services that are indistinguishable from the same items offered by a different supplier. Examples include agricultural, energy, and raw materials such as rock salt and metal ores.
· Market allocation: This occurs when competitors agree to divide markets between themselves. These markets may be delineated by geographic regions, allocated in ratios, or differentiated by types.
· Sham bid/complementary bidding: This is a bid submitted by a competitor in which the amounts are clearly too high for consideration or are riddled with unrealistic special conditions, forcing purchasers to select another bid. Sham bids allow competitors to provide the appearance of a legitimate competitive bid process.