Am I a Price-Fixer? A Behavioral Economics Analysis of Cartels

CRIMINALISING CARTELS: A CRITICAL INTERDISCIPLINARY STUDY OF AN INTERNATIONAL REGULATORY MOVEMENT, 2010

University of Tennessee Legal Studies Research Paper No. 97

Posted: 13 Jan 2010 Last revised: 25 Feb 2010

Maurice E. Stucke

University of Tennessee College of Law; The Konkurrenz Group

Date Written: January 12, 2010

Abstract

This article considers why executives risk prison, their careers, and their status in the community, and violate the antitrust laws. The generally accepted approach today is that price-fixers behave as “rational” profit-maximizers. Executives engage in a cost-benefit analysis to see if the benefits from the crime are worth taking the risks. To achieve optimal deterrence, the economic theory goes, the antitrust penalty should equal the violation’s expected net harm to others (plus enforcement costs) divided by the probability of detection and proof of the violation. Despite increasing antitrust fines and jail sentences, cartels continue to exist. Before the United States responds with greater fines and jail sentences, it makes sense to evaluate several assumptions underlying optimal deterrence theory. In reviewing the behavioral economics literature, policymakers will have a better grasp of the situational and dispositional factors that promote price-fixing.

Keywords: Cartels, Antitrust, Competition Law, Behavioral Economics, Optimal Deterrence Theory

JEL Classification: B25, K42, L41

Suggested Citation

Stucke, Maurice E., Am I a Price-Fixer? A Behavioral Economics Analysis of Cartels (January 12, 2010). CRIMINALISING CARTELS: A CRITICAL INTERDISCIPLINARY STUDY OF AN INTERNATIONAL REGULATORY MOVEMENT, 2010; University of Tennessee Legal Studies Research Paper No. 97. Available at SSRN: https://ssrn.com/abstract=1535720

Maurice E. Stucke (Contact Author)

University of Tennessee College of Law ( email )

1505 W. Cumberland Ave.
Knoxville, TN 37996
United States
865-974-9816 (Phone)

HOME PAGE: http://law.utk.edu/people/maurice-stucke/

The Konkurrenz Group ( email )

5335 Wisconsin Ave., NW
Suite 440
Washington, DC 20015
United States

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