How do sanctions work? The choice between cartel formation and tacit collusion

Maximilian Andres, Lisa Bruttel and Jana Friedrichsen

VfS Annual Conference 2021 (Virtual Conference): Climate Economics from Verein für Socialpolitik / German Economic Association

Abstract: This paper analyzes the inner workings of cartels. To understand how sanctioning institutions prevent cartel formation we study their effect on firms' communication in a laboratory experiment. Using machine learning to organize the chat communication into topics, we find that firms are less likely to communicate explicitly about price fixing when sanctioning institutions are present. At the same time, average prices are lower when communication is less explicit. A mediation analysis suggests that sanctions are effective in hindering cartel formation not only because they introduce a risk of being fined but also by reducing the prevalence of explicit price communication

Keywords: cartel; collusion; communication; machine learning; experiment (search for similar items in EconPapers)
JEL-codes: C92 D43 L41 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-dcm, nep-law and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/242372/1/vfs-2021-pid-49399.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc21:242372

Access Statistics for this paper

More papers in VfS Annual Conference 2021 (Virtual Conference): Climate Economics from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().