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Explicit Collusion under Antitrust Enforcement

Author

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  • Mouraviev, Igor

    (Center for Mathematical Economics, Bielefeld University)

Abstract

The article seeks to fi ll the gap between tacit and explicit collusion in a setting where fi rms observe only their own output levels and a common price, which includes a stochastic component. Without communication, firms fail to discriminate between random shocks and marginal deviations, which constrains the scope for collusion. By eliminating uncertainty about what has happened, communication facilitates detection of deviations but reduces collusive pro fits due to the risk of exposure to legal sanctions. With the optimal collusive strategy, firms communicate only if the market price falls somewhat below the trigger price. Moreover, they tend to communicate more often as they become less patient, a cartel grows in size, or demand uncertainty rises.

Suggested Citation

  • Mouraviev, Igor, 2014. "Explicit Collusion under Antitrust Enforcement," Center for Mathematical Economics Working Papers 494, Center for Mathematical Economics, Bielefeld University.
  • Handle: RePEc:bie:wpaper:494
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    File URL: https://pub.uni-bielefeld.de/download/2675305/2901862
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    References listed on IDEAS

    as
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    6. Joseph E. Harrington & Andrzej Skrzypacz, 2011. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices," American Economic Review, American Economic Association, vol. 101(6), pages 2425-2449, October.
    7. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-465, Autumn.
    8. McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-350, April.
    9. Olivier Compte, 1998. "Communication in Repeated Games with Imperfect Private Monitoring," Econometrica, Econometric Society, vol. 66(3), pages 597-626, May.
    10. David Genesove & Wallace P. Mullin, 2001. "Rules, Communication, and Collusion: Narrative Evidence from the Sugar Institute Case," American Economic Review, American Economic Association, vol. 91(3), pages 379-398, June.
    11. Joseph E. Harrington, Jr, 2006. "How Do Cartels Operate?," Economics Working Paper Archive 531, The Johns Hopkins University,Department of Economics.
    12. Harrington, Joseph E., 2006. "How Do Cartels Operate?," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(1), pages 1-105, August.
    13. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
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    Cited by:

    1. Tim Reuter, 2017. "Endogenous Cartel Organization and Antitrust Fine Discrimination," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(3), pages 291-313, November.
    2. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(2), pages 193-216, March.
    3. Luke Garrod & Matthew Olczak, 2016. "Collusion, Firm Numbers and Asymmetries Revisited," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2016-11, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    4. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," Post-Print halshs-03760756, HAL.
    5. David Spector, 2017. "Cheap talk, monitoring and collusion," Working Papers hal-01975642, HAL.
    6. David Spector, 2022. "Cheap Talk, Monitoring and Collusion," PSE-Ecole d'économie de Paris (Postprint) halshs-03760756, HAL.

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    More about this item

    Keywords

    Imperfect Monitoring; Communication; Frequency ofMeetings.; Collusion;
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