Using Computer Science to Detect Cheat Tolerant Cartels

28 Pages Posted: 30 Oct 2023

See all articles by Giovanna Massarotto

Giovanna Massarotto

Center for Technology Innovation and Competition (CTIC), University of Pennsylvania; UCL Centre for Blockchain Technologies (UCL CBT)

Date Written: October 24, 2023

Abstract

Technology is upending markets and changing the antitrust playing field. Cartel agreements represent the most severe antitrust conduct, but they are challenging to prosecute because they are secret and self-enforcing. Fortunately, cartels are unstable because cartel members have high incentives to cheat on the cartel scheme, which means mechanisms to prevent cheating are necessary for a cartel to survive. However, computer science shows that computers connected in a network can coordinate their activity according to a common scheme and reach consensus on a bit of information like a price by tolerating cheating. Although computer networks are governed by a computer protocol rather than competitors coordinating their activities in a market through a cartel scheme, mechanisms that enable computers to agree on a bit of information by tolerating cheating are enshrined in algorithmic solutions that work in abstract. Thus, theoretically these mechanisms work in a computer as well as in a non-computer situation, which the present cartel law does not fully capture.

This paper defines mechanisms used in computer science to build systems which enable computers to coordinate their activities and tolerate computer deviations from a common scheme—cheat tolerance mechanisms. It demonstrates that these mechanisms are not fully captured by the ‘plus factors’ that courts presently adopt to detect cartel agreements, suggesting a framework to detect possible cartel agreements more effectively. In this way, I propose a computer science approach to complement the present law-and-economics antitrust analysis by using the case of cheat tolerant cartels.

Keywords: antitrust analysis, cartel agreements, cartel cheating, cheat tolerance mechanisms, computer science approach, technology, market behavior, Byzantine Generals Problem

JEL Classification: C73, K21, K42, L13, L40, L41, L51

Suggested Citation

Massarotto, Giovanna, Using Computer Science to Detect Cheat Tolerant Cartels (October 24, 2023). U of Penn, Inst for Law & Econ Research Paper No. 23-38, Available at SSRN: https://ssrn.com/abstract=4617160

Giovanna Massarotto (Contact Author)

Center for Technology Innovation and Competition (CTIC), University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

UCL Centre for Blockchain Technologies (UCL CBT) ( email )

London
United Kingdom

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