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Optimal Cartel Pricing in the Presence of an Antitrust Authority

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  • Joseph E Harrington

Abstract

Price dynamics are characterized when a price-fixing cartel is concerned about creating suspicions of the presence of a cartel A dynamical extension of static models yields the counterfactual prediction that the cartel initially raises price and then gradually lowers it An alternative specification generates a more plausible result that the cartel gradually raises price For that specification the long-run cartel price is found to be decreasing in the damage multiple but is independent of the level of fixed fines A more stringent standard for calculating damages is shown to induce the cartel to price higher

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  • Joseph E Harrington, 2001. "Optimal Cartel Pricing in the Presence of an Antitrust Authority," Economics Working Paper Archive 460, The Johns Hopkins University,Department of Economics, revised Jul 2002.
  • Handle: RePEc:jhu:papers:460
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