Tacit collusion and liability rules

Tim Friehe

European Journal of Law and Economics, 2014, vol. 38, issue 3, 453-469

Abstract: This paper demonstrates that the likelihood of tacit collusion in a given oligopolistic industry may depend on the kind of liability rule applied to the industry. We study typical settings for the analysis of product liability and environmental liability. For the latter, it is established that tacit collusion is more likely under strict liability than under negligence. However, the two liability rules are equivalent with regard to their effects on tacit collusion in the model pertaining to product liability. This context-dependent impact on tacit collusion can be traced back to a difference in the shape of firms’ cost functions. Copyright Springer Science+Business Media, LLC 2014

Keywords: Tacit collusion; Cartel; Liability law; L41; L13; K13 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:ejlwec:v:38:y:2014:i:3:p:453-469

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DOI: 10.1007/s10657-012-9346-z

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