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Antitrust as Facilitating Factor for Collusion

Author

Listed:
  • Bos Iwan

    (Department of Organization and Strategy, Maastricht University, 6200 MD Maastricht, The Netherlands)

  • Letterie Wilko

    (Department of Organization and Strategy, Maastricht University, Maastricht, The Netherlands)

  • Vermeulen Dries

    (Department of Quantitative Economics, Maastricht University, Maastricht, The Netherlands)

Abstract
This paper examines collusion among firms whose discount factors are private information. Mutual uncertainty regarding intentions to restrict competition might undermine the possibility of tacit collusion. Firms that want to collude may, however, reveal their intentions by consciously acting in breach of antitrust laws. As antitrust activity makes explicit collusion costly in expected terms, it can potentially be (ab)used as signaling device. We show that the fight against cartels may indeed facilitate collusion.

Suggested Citation

  • Bos Iwan & Letterie Wilko & Vermeulen Dries, 2015. "Antitrust as Facilitating Factor for Collusion," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(2), pages 797-814, April.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:2:p:797-814:n:11
    DOI: 10.1515/bejeap-2014-0023
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    References listed on IDEAS

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    1. Stephen Davies & Matthew Olczak, 2008. "Tacit versus Overt Collusion Firm Asymmetries and Numbers: What's the Evidence?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2008-32, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    2. Joseph E. Harrington & Andrzej Skrzypacz, 2011. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices," American Economic Review, American Economic Association, vol. 101(6), pages 2425-2449, October.
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    9. Harrington, Joseph E. & Zhao, Wei, 2012. "Signaling and tacit collusion in an infinitely repeated Prisoners’ Dilemma," Mathematical Social Sciences, Elsevier, vol. 64(3), pages 277-289.
    10. Iwan Bos & Ronald Peeters & Erik Pot, 2013. "Do antitrust agencies facilitate meetings in smoke-filled rooms?," Applied Economics Letters, Taylor & Francis Journals, vol. 20(6), pages 611-614, April.
    11. Choi, Dosoung & Philippatos, George C, 1983. "Financial Consequences of Antitrust Enforcement," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 501-506, August.
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    Cited by:

    1. Jochem, Annabelle & Parrotta, Pierpaolo & Valletta, Giacomo, 2020. "The impact of the 2002 reform of the EU leniency program on cartel outcomes," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    2. Carsten J. Crede & Liang Lu, 2016. "The effects of endogenous enforcement on strategic uncertainty and cartel deterrence," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 16-08, School of Economics, University of East Anglia, Norwich, UK..
    3. Loet Stekelenburg & Peter T. Dijkstra & Elianne F. Steenbergen & Jessanne Mastop & Naomi Ellemers, 2023. "Integrating Norms, Knowledge, and Social Ties into the Deterrence Model of Cartels: A Survey Study of Business Executives," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(3), pages 275-315, November.
    4. Napel, Stefan & Welter, Dominik, 2023. "Umbrella pricing and cartel size," International Journal of Industrial Organization, Elsevier, vol. 91(C).
    5. Chowdhury, Subhasish M. & Crede, Carsten J., 2020. "Post-cartel tacit collusion: Determinants, consequences, and prevention," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    6. Moritz Birgit & Becker Martin & Schmidtchen Dieter, 2018. "Measuring the Deterrent Effect of European Cartel Law Enforcement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-27, July.

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    More about this item

    Keywords

    antitrust enforcement; cartel formation; explicit collusion; tacit collusion;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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