Cartel Sales Dynamics when Monitoring for Compliance is More Frequent than Punishment for Non-Compliance
This study investigates when a cartel that uses a sales quota allocation scheme monitors more frequently than it enforces; for example, monitoring of sales is done on a weekly basis but firms are only required to comply with sales quotas on a quarterly basis. In a simple three-period quantity game with iid cost and demand shocks, we show that the volatility of a cartel member's sales follows a U-shape within the compliance horizon. In comparison, sales volatility is constant over time under competition. This result offers a simple empirical test for distinguishing collusion from competition using sales data.
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- 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.
- Joseph E. Harrington, Jr. & Andrzej Skrzypacz, 2009. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices," Economics Working Paper Archive 555, The Johns Hopkins University,Department of Economics.
- Joseph E Harrington & Jr Andrzej Skrzypacz, 2004.
"Collusion under Monitoring of Sales,"
Economics Working Paper Archive
509, The Johns Hopkins University,Department of Economics, revised Mar 2005.
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