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Post-Cartel Tacit Collusion: Determinants, Consequences, and Prevention

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  • Subhasish M. Chowdhury

    (Centre for Competition Policy, Centre for Behavioural and Experimental Social Science and School of Economics, University of East Anglia)

  • Carsten J. Crede

    (Centre for Competition Policy, Centre for Behavioural and Experimental Social Science and School of Economics, University of East Anglia)

Abstract

We experimentally investigate the attributes and effects of post-cartel tacit collusion (PCTC) as well as policy measures aimed at its prevention. PCTC occurs irrespective of the absence or presence of an antitrust authority and in different competition regimes. PCTC is determined both by collusive price hysteresis and learning about cartel partners’ characteristics and strategies. As a result, it is strongly related with the preceding cartel success. The estimation of cartel overcharges, an important factor in litigation, is found out to be biased downwards in the presence of PCTC. As a policy note, we show that debarment of managers involved in cartels from the market can prevent PCTC.

Suggested Citation

  • Subhasish M. Chowdhury & Carsten J. Crede, 2015. "Post-Cartel Tacit Collusion: Determinants, Consequences, and Prevention," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2015-01v2, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    • Handle: RePEc:uea:ueaccp:2015_01v2
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    2. Stadler, Manfred & Güth, Werner & Zaby, Alexandra, 2016. "Capacity precommitment and price transparency platforms. Theoretical benchmark and experimental evidence," VfS Annual Conference 2016 (Augsburg): Demographic Change 145515, Verein für Socialpolitik / German Economic Association.
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    4. Joris Gillet, 2021. "Is Voting for a Cartel a Sign of Cooperativeness?," Games, MDPI, vol. 12(2), pages 1-10, June.
    5. Carsten J. Crede & Liang Lu, 2016. "The effects of endogenous enforcement on strategic uncertainty and cartel deterrence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 16-08, School of Economics, University of East Anglia, Norwich, UK..
    6. Gillet, Joris, 2017. "Voting For a Cartel as a Sign of Cooperativeness," MPRA Paper 82160, University Library of Munich, Germany.
    7. Tebbe, Eva, 2018. "Once bitten, twice shy? Market size affects the effectiveness of a leniency program by (de-)activating hysteresis effects," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168304, Verein für Socialpolitik / German Economic Association, revised 2018.
    8. Fonseca, Miguel A. & Gonçalves, Ricardo & Pinho, Joana & Tabacco, Giovanni A., 2022. "How do antitrust regimes impact on cartel formation and managers’ labor market? An experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 204(C), pages 643-662.

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    More about this item

    Keywords

    tacit collusion; antitrust; cartels; price hysteresis; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - 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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