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Cartel pricing dynamics in the presence of an antitrust authority.(Antitrust laws )
RAND Journal of Economics
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December 22, 2004|
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COPYRIGHT 2004 Rand, Journal of Economics. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group.
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Cartel pricing is characterized when firms are concerned about creating suspicions that a cartel has formed. Balancing concerns about maintaining the stability of the cartel with those of a voiding detection, the cartel may either (i) gradually raise price to its steady-state level or (ii) gradually raise price and then have it decline to its steady-state level. Antitrust laws may have a perverse effect as they make cartel stability easier and thus allow for higher cartel prices.
1. Introduction
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