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Price staggering in cartels

Heiko Gerlach and Lan Nguyen

International Journal of Industrial Organization, 2021, vol. 77, issue C

Abstract: In this paper we investigate the optimal organization of staggered price increases in cartels. Staggered price increases impose a cost during cartel formation as the price leader initially loses sales. We show that for intermediate discount factors, staggered price increases can only be sustained when the increase is neither too small nor too large. When a cartel executes two consecutive price increases, the choice between using the same leader or alternating leadership depends on the initial price level in the industry. We also discuss the choice between simultaneous and staggered price increases with an exogenous antitrust detection function, the allocation of price leadership with cost asymmetry, and the effect of product differentiation on price staggering.

Keywords: Cartels; Staggered price increases; Collusive price leadership; Antitrust policy (search for similar items in EconPapers)
JEL-codes: D21 D43 L41 L44 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:77:y:2021:i:c:s0167718721000503

DOI: 10.1016/j.ijindorg.2021.102757

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International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

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