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Explicit Collusion Under Antitrust Enforcement

49 Pages Posted: 13 Dec 2013  

Igor Mouraviev

Bielefeld University - Center for Mathematical Economics

Date Written: July 14, 2013

Abstract

The article seeks to fi…ll the gap between tacit and explicit collusion in a setting where firms observe only their own output levels and a common price, which includes a stochastic component. Without communication, firms fail to discriminate between random shocks and marginal deviations, which constrains the scope for collusion. By eliminating uncertainty about what has happened, communication facilitates detection of deviations but reduces collusive profits due to the risk of exposure to legal sanctions. With the optimal collusive strategy, firms communicate only if the market price falls somewhat below the trigger price. Moreover, they tend to communicate more often as they become less patient, a cartel grows in size, or demand uncertainty rises.

Keywords: collusion, communication, imperfect monitoring, frequency of meetings

JEL Classification: D82, L41

Suggested Citation

Mouraviev, Igor, Explicit Collusion Under Antitrust Enforcement (July 14, 2013). Institute of Mathematical Economics Working Paper No. 494. Available at SSRN: https://ssrn.com/abstract=2366455 or http://dx.doi.org/10.2139/ssrn.2366455

Igor Mouraviev (Contact Author)

Bielefeld University - Center for Mathematical Economics ( email )

Postfach 10 01 31
Bielefeld, D-33501
Germany

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