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Cartel Pricing Dynamics in the Presence of an Antitrust Authority

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Author Info
Joseph E. Harrington, Jr. () (Johns Hopkins University)

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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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Publisher 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
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:rje:randje:v:35:y:2004:4:p:651-673

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Harrington, Joseph Jr., 2003. "Some implications of antitrust laws for cartel pricing," Economics Letters, Elsevier, vol. 79(3), pages 377-383, June. [Downloadable!] (restricted)
  2. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x.
  3. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-65, Autumn.
    Other versions:
  4. 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.
  5. Philippe Cyrenne, 1999. "On Antitrust Enforcement and the Deterrence of Collusive Behaviour," Review of Industrial Organization, Springer, vol. 14(3), pages 257-272, May. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. 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. [Downloadable!] (restricted)
  8. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January. [Downloadable!] (restricted)
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  9. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March. [Downloadable!] (restricted)
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  10. 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. [Downloadable!] (restricted)
  11. Hay, George A & Kelley, Daniel, 1974. "An Empirical Survey of Price Fixing Conspiracies," Journal of Law & Economics, University of Chicago Press, vol. 17(1), pages 13-38, April.
  12. 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. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jeroen Hinloopen, 2005. "The Pro-collusive Effect of Increasing the Repose Period for Price Fixing Agreements," Tinbergen Institute Discussion Papers 05-104/1, Tinbergen Institute. [Downloadable!]
  2. Caroline Elliott & Melinda Acutt, 2007. "Antitrust Policy: The Impact of Revenue Penalties on Price," Experimental Economics, Springer, vol. 7(1), pages 1-8, March. [Downloadable!] (restricted)
  3. Harold Houba & Evgenia Motchenkova & Quan Wen, 2008. "Maximal Cartel Pricing and Leniency Programs," Tinbergen Institute Discussion Papers 08-120/1, Tinbergen Institute. [Downloadable!]
    Other versions:
  4. Joseph E. Harrington, Jr, 2005. "Optimal Corporate Leniency Programs," Economics Working Paper Archive 527, The Johns Hopkins University,Department of Economics. [Downloadable!]
  5. Gianmaria Martini, 2005. "Hard Core Cartels and Avoidance of Investigation in the Presence of an Antitrust Authority," Industrial Organization 0502014, EconWPA. [Downloadable!]
  6. Rüggeberg, J. & Schinkel, M.P. & Tuinstra, J., 2005. "Illinois Walls: How barring indirect purchaser suits facilitates collusion," CeNDEF Working Papers 05-10, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. [Downloadable!]
    Other versions:
  7. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics. [Downloadable!]
  8. Joseph E. Harrington, Jr. & Joe Chen, 2005. "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection," CIRJE F-Series CIRJE-F-359, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
    Other versions:
  9. Joe Chen & Joseph E. Harrington, Jr., 2005. "The Impact of the Corporate Leniency Program on Cartel Formation and the Cartel Price Path," CIRJE F-Series CIRJE-F-358, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
    Other versions:
  10. Joseph E. Harrington, Jr, 2006. "Modelling the Birth and Death of Cartels with an Application to Evaluating Antitrust Policy," Economics Working Paper Archive 532, The Johns Hopkins University,Department of Economics. [Downloadable!]
  11. Switgard Feuerstein, 2005. "Collusion in Industrial Economics—A Survey," Journal of Industry, Competition and Trade, Springer, vol. 5(3), pages 163-198, December. [Downloadable!] (restricted)
  12. Skrzypacz, Andrzej & Harrington, Joseph E., 2005. "Collusion under Monitoring of Sales," Research Papers 1885, Stanford University, Graduate School of Business. [Downloadable!]
    Other versions:
  13. Schinkel, M.P. & Tuinstra, J., 2004. "Imperfect Competition Law Enforcement," CeNDEF Working Papers 04-07, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance. [Downloadable!]
    Other versions:
  14. Heski Bar-Isaac & Mariagiovanna Baccara, 2008. "Interrogation Methods and Terror Networks," Working Papers 08-8, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  15. J. Hinloopen, 2003. "Cartel Stability with Time-dependent Detection Probabilities," Tinbergen Institute Discussion Papers 03-104/1, Tinbergen Institute. [Downloadable!]
  16. Caroline Elliott & Melinda Acutt, 2007. "Antitrust Policy: The Impact of Revenue Penalties on Price," Journal of Industry, Competition and Trade, Springer, vol. 7(1), pages 1-8, March. [Downloadable!] (restricted)
  17. Heski Bar-Isaac & Mariagiovanna Baccara, 2006. "How to Organize Crime," Working Papers 06-07, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
    Other versions:
  18. Jay Pil Choi & Heiko Gerlach, 2009. "Multi-Market Collusion with Demand Linkages and Antitrust Enforcement," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  19. Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics. [Downloadable!]
  20. Flavia Roldán, 2008. "Collusive networks in market sharing agreements in the presence of an antitrust authority," Economics Working Papers we085024, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  21. Iwan Bos & Maarten Pieter Schinkel, 2009. "Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing," Tinbergen Institute Discussion Papers 09-007/1, Tinbergen Institute. [Downloadable!]
  22. repec:bep:eapcon:v:7:y:2007:i:1:p:1135-1135 is not listed on IDEAS
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