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 EconWPA in its series Industrial Organization with number 0502014.
Length: 56 pages
Date of creation: 23 Feb 2005
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Note: Type of Document - pdf; pages: 56
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Other versions of this item:
- Gianmaria Martini, 2005. "Hard Core Cartels and Avoidance of Investigation in the Presence of an Antitrust Authority," Working Papers 0505, Department of Economics and Technology Management, University of Bergamo.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-COM-2005-04-16 (Industrial Competition)
- NEP-IND-2005-04-16 (Industrial Organization)
- NEP-REG-2005-04-16 (Regulation)
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