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Cartel Sales Dynamics when Monitoring for Compliance is More Frequent than Punishment for Non-Compliance


  • Joseph E. Harrington, Jr.
  • Juan-Pablo Montero

    () (Instituto de Economía. Pontificia Universidad Católica de Chile.)


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.

Suggested Citation

  • Joseph E. Harrington, Jr. & Juan-Pablo Montero, 2013. "Cartel Sales Dynamics when Monitoring for Compliance is More Frequent than Punishment for Non-Compliance," Documentos de Trabajo 446, Instituto de Economia. Pontificia Universidad Católica de Chile..
  • Handle: RePEc:ioe:doctra:446

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    1. 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.
    2. Joseph E. Harrington Jr. & Andrzej Skrzypacz, 2007. "Collusion under monitoring of sales," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 314-331, June.
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    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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