Cartel Pricing Dynamics in the Presence of an Antitrust Authority
AbstractPrice-fixing is characterized when firms are concerned about creating suspicions that a cartel has formed. Antitrust laws have a complex effect on pricing as they interact with the conditions determining the internal stability of the cartel. Dynamics are driven by two forces - the sensitivity of detection to price movements causes a cartel to gradually raise price while the sensitivity of penalties to the price level induces the cartel to lower price over time in order to maintain the stability of the cartel. While antitrust laws can lower collusive prices, they can also raise them by making it easier for firms to collude.
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Bibliographic InfoPaper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 487.
Date of creation: Dec 2002
Date of revision: May 2003
Other versions of this item:
- Joseph E. Harrington, Jr., 2004. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 651-673, Winter.
- Joseph E. Harrington, Jr., 2003. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Computing in Economics and Finance 2003 26, Society for Computational Economics.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L4 - Industrial Organization - - Antitrust Issues and Policies
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