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Endogenous Cartel Organization and Antitrust Fine Discrimination

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  • Tim Reuter

    (Department of Economics, University of Konstanz, Germany)

Abstract

Third parties such as trade associations often assist cartels by collecting and evaluating market behaviour at the firm level. Under incomplete information neutral market oversight helps to distinguish defecting from complying behaviour, increasing the effectiveness of punishments for defectors and increasing cartel persistence. We investigate how cartels sort themselves into different organizational forms and whether cartel enforcement can be improved by setting fines contingent on the organizational form. A fine reduction for firms operating without the help of a third party causes some cartels to switch to a less persistent organizational form. Two drawbacks of this fine differentiation are that some new cartels will arise and that some of the existing cartels will become more persistent as the need to punish defectors decreases. Our paper is the first in the marginal deterrence literature to identify this second effect.

Suggested Citation

  • Tim Reuter, 2013. "Endogenous Cartel Organization and Antitrust Fine Discrimination," Working Paper Series of the Department of Economics, University of Konstanz 2013-09, Department of Economics, University of Konstanz.
    • Handle: RePEc:knz:dpteco:1309
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    More about this item

    Keywords

    cartel organization; antitrust enforcement; trade association; marginal deterrence;
    All these keywords.

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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