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Explicit Collusion under Antitrust Enforcement

Author

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  • Mouraviev, Igor

    (Center for Mathematical Economics, Bielefeld University)

Abstract

The article seeks to fi ll the gap between tacit and explicit collusion in a setting where fi rms observe only their own output levels and a common price, which includes a stochastic component. Without communication, firms fail to discriminate between random shocks and marginal deviations, which constrains the scope for collusion. By eliminating uncertainty about what has happened, communication facilitates detection of deviations but reduces collusive pro fits due to the risk of exposure to legal sanctions. With the optimal collusive strategy, firms communicate only if the market price falls somewhat below the trigger price. Moreover, they tend to communicate more often as they become less patient, a cartel grows in size, or demand uncertainty rises.

Suggested Citation

  • Mouraviev, Igor, 2014. "Explicit Collusion under Antitrust Enforcement," Center for Mathematical Economics Working Papers 494, Center for Mathematical Economics, Bielefeld University.
  • Handle: RePEc:bie:wpaper:494
    as

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    File URL: https://pub.uni-bielefeld.de/download/2675305/2901862
    File Function: First Version, 2013
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    References listed on IDEAS

    as
    1. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, August.
    2. Joseph E. Harrington & Andrzej Skrzypacz, 2011. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices," American Economic Review, American Economic Association, vol. 101(6), pages 2425-2449, October.
    3. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-465, Autumn.
    4. McCutcheon, Barbara, 1997. "Do Meetings in Smoke-Filled Rooms Facilitate Collusion?," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 330-350, April.
    5. Stephen Davies & Matthew Olczak, 2008. "Tacit versus Overt Collusion Firm Asymmetries and Numbers: What’s the Evidence?," Working Papers 08-32, Centre for Competition Policy, University of East Anglia.
    6. Porter, Robert H., 1983. "Optimal cartel trigger price strategies," Journal of Economic Theory, Elsevier, vol. 29(2), pages 313-338, April.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Garrod, Luke & Olczak, Matthew, 2016. "Collusion, Firm Numbers and Asymmetries Revisited," MPRA Paper 74352, University Library of Munich, Germany.

    More about this item

    Keywords

    Imperfect Monitoring; Communication; Frequency ofMeetings.; Collusion;

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