The effect of a lottery on collusion sustainability

Salvatore Ciucci
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Salvatore Ciucci: Dipartimento di Economia, Università degli Studi della Campania “Luigi Vanvitelli”

No 2025.21, Working Papers from Fondazione Eni Enrico Mattei

Abstract: There are many evidences which prove that cartels’ price leads to an economic inefficiency, due to the reduced consumers welfare. Antitrust authorities have set up different ways to defeat and prevent collusive agreements, but as widely showed by the literature, deterring collusion may have adverse effects, like higher price in surviving cartels, reduced turnover of firms’ employees, and disincentive for competing firms to cooperate, in the sense that if firms exchange information about the evolution of demand or costs, then they may adopt better choices; moreover, deterring collusion may have even a pro-collusion effect. The paper suggests an additional anti-cartel tool which does not have side effects, and supporting no cost, it can get worse collusion stability. Analysing a supergame of collusion, in a Bertrand duopoly framework in which is run a two-stage lottery, we show that deviation strategy becomes more attractive, even if lottery jackpot tends to zero.

Keywords: Competition policy; Antitrust; Cartel; Collusion; Lottery (search for similar items in EconPapers)
JEL-codes: L40 L41 (search for similar items in EconPapers)
Date: 2025-10
New Economics Papers: this item is included in nep-com, nep-mic and nep-reg
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