Endogenous Cartel Organization and Antitrust Fine Discrimination

Tim Reuter

No 2013-09, Working Paper Series of the Department of Economics, University of Konstanz from Department of Economics, University of Konstanz

Abstract: Third parties such as trade associations often assist cartels by collecting and evaluating market behaviour at the firm level. Under incomplete information neutral market oversight helps to distinguish defecting from complying behaviour, increasing the effectiveness of punishments for defectors and increasing cartel persistence. We investigate how cartels sort themselves into different organizational forms and whether cartel enforcement can be improved by setting fines contingent on the organizational form. A fine reduction for firms operating without the help of a third party causes some cartels to switch to a less persistent organizational form. Two drawbacks of this fine differentiation are that some new cartels will arise and that some of the existing cartels will become more persistent as the need to punish defectors decreases. Our paper is the first in the marginal deterrence literature to identify this second effect.

Keywords: cartel organization; antitrust enforcement; trade association; marginal deterrence (search for similar items in EconPapers)
JEL-codes: K21 K42 L41 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2013-05-06
New Economics Papers: this item is included in nep-com, nep-hme and nep-law
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Related works:
Journal Article: Endogenous Cartel Organization and Antitrust Fine Discrimination (2017)
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