A Cartel's response to cheating: an empirical investigation of the De Beers diamond empire.

From: Southern Economic Journal | Date: July 1, 2006| Author: Bergenstock, Donna J.; Deily, Mary E.; Taylor, Larry W. | Copyright information

1. Introduction

Cartel theory suggests that serious punishment in the form of price competition is the predicted response to cheating by a cartel member, but recent work on cartel operations suggests that some cartels might use a richer set of more measured responses to support their arrangements. Levenstein (1997) and Genesove and Mullin (2001) describe cartels that used limited retaliation, as well as communication, to maintain collusion. However, even these cartels re...

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