Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices

Joseph E. Harrington and Andrzej Skrzypacz

American Economic Review, 2011, vol. 101, issue 6, pages 2425-49

Abstract: Motivated by recent cartel practices, a stable collusive agreement is characterized when firms' prices and quantities are private information. Conditions are derived whereby an equilibrium exists in which firms truthfully report their sales and then make transfers within the cartel based on these reports. The properties of this equilibrium fit well with the cartel agreements in a number of markets including citric acid, lysine, and vitamins. (JEL D43, D82, K21, L12, L61, L65)

Date: 2011
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Working Paper: Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices (2009)
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