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Cartel Pricing Dynamics in the Presence of an Antitrust Authority

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  • Joseph E. Harrington, Jr.

    ()
    (Johns Hopkins University)

Abstract

Cartel pricing is characterized when firms are concerned about creating suspicions that a cartel has formed. Balancing concerns about maintaining the stability of the cartel with those of avoiding detection, the cartel may either (i) gradually raise price to its steady-state level or (ii) gradually raise price and then have it decline to its steady-state level. Antitrust laws may have a perverse effect as they make cartel stability easier and thus allow for higher cartel prices.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 35 (2004)
Issue (Month): 4 (Winter)
Pages: 651-673

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Handle: RePEc:rje:randje:v:35:y:2004:4:p:651-673

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  1. Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-40, December.
  2. Hay, George A & Kelley, Daniel, 1974. "An Empirical Survey of Price Fixing Conspiracies," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 13-38, April.
  3. Harrington, Joseph Jr., 2003. "Some implications of antitrust laws for cartel pricing," Economics Letters, Elsevier, vol. 79(3), pages 377-383, June.
  4. Massimo Motta & Michele Polo, . "Leniency Programs and Cartel Prosecution," Working Papers 150, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-65, Autumn.
  6. Block, Michael Kent & Nold, Frederick Carl, 1981. "The Deterrent Effect of Antitrust Enforcement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 429-45, June.
  7. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
  8. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x.
  9. Michele Polo, . "The Optimal Prudential Deterrence of Price Fixing Agreements," Working Papers 120, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  10. Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-36, August.
  11. Philippe Cyrenne, 1999. "On Antitrust Enforcement and the Deterrence of Collusive Behaviour," Review of Industrial Organization, Springer, vol. 14(3), pages 257-272, May.
  12. McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-50, April.
  13. Chantale LaCasse, 1995. "Bid Rigging and the Threat of Government Prosecution," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 398-417, Autumn.
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