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Intermittent Collusive Agreements: Antitrust Policy and Business Cycles

Author

Listed:
  • Dargaud Emilie

    (Univ Lyon, Université Lumière Lyon 2, GATE, UMR 5824, F-69130 Ecully, France)

  • Jacques Armel

    (CEMOI TEPP-CNRS (FR2042), Université de La Réunion, Faculté de Droit et d’Economie, 15, Avenue René Cassin, 97715 Saint-Denis Messag Cedex 9, Saint-Denis Cedex, France)

Abstract

In this article we study collusive strategies and the optimal level of fines when firms face random demand fluctuations. Collusive firms can choose to alternate collusive periods with more competitive periods: such an intermittent strategy can be implemented particularly if demand variability is high. Firms then set competitive prices during recessions to cancel the risk of cartel detection and keep the ability to cartelize for the future. If the maximum fine is too low to fully deter cartels, the antitrust authority can influence the choice of collusive agreement by varying the level of fines according to demand states. If the demand is highly variable, the antitrust authority may induce firms to collude in all demand states (by decreasing the fine during recessions), in order to detect and break up cartels more easily. On the other hand, if the demand variability is low the optimal policy may be to reduce the fine when demand is high.

Suggested Citation

  • Dargaud Emilie & Jacques Armel, 2023. "Intermittent Collusive Agreements: Antitrust Policy and Business Cycles," Review of Law & Economics, De Gruyter, vol. 19(3), pages 351-392, November.
  • Handle: RePEc:bpj:rlecon:v:19:y:2023:i:3:p:351-392:n:7
    DOI: 10.1515/rle-2022-0017
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    More about this item

    Keywords

    collusion; antitrust policy; business cycles;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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