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Price staggering in cartels

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  • Gerlach, Heiko
  • Nguyen, Lan

Abstract

In this paper we investigate the optimal organization of staggered price increases in cartels. Staggered price increases impose a cost during cartel formation as the price leader initially loses sales. We show that for intermediate discount factors, staggered price increases can only be sustained when the increase is neither too small nor too large. When a cartel executes two consecutive price increases, the choice between using the same leader or alternating leadership depends on the initial price level in the industry. We also discuss the choice between simultaneous and staggered price increases with an exogenous antitrust detection function, the allocation of price leadership with cost asymmetry, and the effect of product differentiation on price staggering.

Suggested Citation

  • Gerlach, Heiko & Nguyen, Lan, 2021. "Price staggering in cartels," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:indorg:v:77:y:2021:i:c:s0167718721000503
    DOI: 10.1016/j.ijindorg.2021.102757
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    References listed on IDEAS

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    More about this item

    Keywords

    Cartels; Staggered price increases; Collusive price leadership; Antitrust policy;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations

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