Post-Cartel Tacit Collusion: Determinants, Consequences, and Prevention

Chowdhury, S.M., & Crede, C.J. (2020). Post-Cartel Tacit Collusion: Determinants, Consequences, and Prevention. International Journal of Industrial Organization, 70, 102590.

28 Pages Posted: 30 Oct 2020

See all articles by Subhasish M. Chowdhury

Subhasish M. Chowdhury

University of Bath - Department of Economics

Date Written: March 6, 2020

Abstract

We experimentally investigate the determinants of post-cartel tacit collusion (PCTC), the effects of PCTC on market outcomes, and potential policy measures aimed at its prevention. PCTC occurs robustly with or without fines or leniency and is determined both by collusive price hysteresis and learning about cartel partners’ characteristics and strategies. As a result, it is also strongly related to the preceding cartel success. PCTC generates a downward bias in the estimated cartel overcharges. This threatens the effectiveness of deterrence induced by private damage litigation and fines imposed on colluding firms based on the overcharge. This bias further increases with preceding cartel stability such that especially more stable sets of colluding firms may be deterred less when PCTC is present. Re-matching colluding subjects with strangers within a session prevents PCTC. This indicates that barring colluding managers from their posts could help impede PCTC in the field.

Keywords: tacit collusion, antitrust, cartels, price hysteresis, experiment

JEL Classification: C91, L13, L41

Suggested Citation

Chowdhury, Subhasish M., Post-Cartel Tacit Collusion: Determinants, Consequences, and Prevention (March 6, 2020). Chowdhury, S.M., & Crede, C.J. (2020). Post-Cartel Tacit Collusion: Determinants, Consequences, and Prevention. International Journal of Industrial Organization, 70, 102590., Available at SSRN: https://ssrn.com/abstract=3690629 or http://dx.doi.org/10.2139/ssrn.3690629

Subhasish M. Chowdhury (Contact Author)

University of Bath - Department of Economics ( email )

Claverton Down
Bath, BA2 7AY
United Kingdom

HOME PAGE: http://https://sites.google.com/site/subhasishmc/

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