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 Society for Computational Economics in its series Computing in Economics and Finance 2003 with number 26.
Date of creation: 01 Aug 2003
Date of revision:
Collusion; Antitrust; Dynamic Games;
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, 2002. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Economics Working Paper Archive 487, The Johns Hopkins University,Department of Economics, revised May 2003.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L4 - Industrial Organization - - Antitrust Issues and Policies
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