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A mnemonic for the major factors influencing the likelihood of collusion

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  • David Kamerschen

Abstract

In the typical industrial organization textbook and class, and in the courtroom, numerous factors are identified as providing a predisposition to a cartel. These factors include cost differences, product differentiation, number of firms, technology, growth of the industry, elasticity, frequency of sales, number and size distribution of sellers and buyers, discount rate, type of competition, vertical integration, cost ratio, imports, sealed bidding, social structure and track record, future expectations, recognition of interdependence, announcements and exchanges of economic information, multimarkets, etc. There are many factors to keep in mind. Fortunately, the accumulated theoretical and empirical work on collusion suggests that we can, for all practical purposes, focus on the factors contained in the mnemonic word CARTEL. The key factors are: Concentration, Additional, Revenue, Talk, Entry, Likeness.

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  • David Kamerschen, 2004. "A mnemonic for the major factors influencing the likelihood of collusion," Applied Economics, Taylor & Francis Journals, vol. 36(10), pages 1021-1024.
    • Handle: RePEc:taf:applec:v:36:y:2004:i:10:p:1021-1024
    DOI: 10.1080/0003684042000246722
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    References listed on IDEAS

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    1. Cabral, Luis M. B., 2000. "Introduction to Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032864, December.
    2. D. R. Kamerschen & J. E. Morgan, 2004. "Collusion analysis of the Alabama liquid asphalt market," Applied Economics, Taylor & Francis Journals, vol. 36(7), pages 673-693.
    3. Shapiro, Carl, 1989. "Theories of oligopoly behavior," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 6, pages 329-414, Elsevier.
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