Hard Core Cartels and Avoidance of Investigation in the Presence of an Antitrust Authority
AbstractHard Core Cartels aim to design, being aware of the presence of an antitrust authority, market practices granting avoidance of antitrust investigations. We show, in a dynamic game, that they can reach this goal and get extra—normal profits. However, the bulk of this opportunity does not lay, here, in limiting price changes across periods (as in Harrington [2004b]), but rather in sending a signal to the authority which has a twofold effect: (1) it does make evident that cartel’s members are currently not engaged in an “excessive” degree of collusion, (2) it credibly shows that this moderate collusive activity has a persistence effect, i.e. it will be maintained also in future periods. We also show that antitrust remedies (e.g. behavioral constraints or injunction reliefs) are more powerful, in limiting the collusive activity, than fines. Last, we show that social welfare is higher if Hard Core Cartels have limited information about the type of authority (i.e. tough or accommodating) they are facing.
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Bibliographic InfoPaper provided by Department of Economics and Technology Management, University of Bergamo in its series Working Papers with number 0505.
Date of creation: 2005
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Hard Core Cartels; antitrust authority; antitrust remedies and fines; persistence of collusion;
Other versions of this item:
- Gianmaria Martini, 2005. "Hard Core Cartels and Avoidance of Investigation in the Presence of an Antitrust Authority," Industrial Organization 0502014, EconWPA.
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
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