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Imperfect Collusion On Surveilled Markets With Free Entry

Author

Listed:
  • Ludwig von Auer
  • Tu Anh Pham

Abstract

Surveys of cartel proceedings reveal that illegal cartels usually (1) attempt to minimize the risk of detection, (2) achieve merely imperfect levels of collusion, (3) compete against some fringe firms, and (4) adjust to market entries and exits. By contrast, existing oligopoly models of collusive behavior consider only some of the four listed stylized facts and, thus, run the risk of missing important interdependencies between them. Therefore, the present paper develops a general quantity leadership model that simultaneously accommodates all four stylized facts. Within this model, an imperfectly colluding group of firms competes against independent fringe rivals. The market is surveilled by an antitrust authority that has three different policy instruments at its disposal: Ensuring free market access, obstructing collusion, and discouraging collusion through law enforcement. The results of the model indicate that the latter two instruments are rather ineffective.

Suggested Citation

  • Ludwig von Auer & Tu Anh Pham, 2023. "Imperfect Collusion On Surveilled Markets With Free Entry," Research Papers in Economics 2023-05, University of Trier, Department of Economics.
    • Handle: RePEc:trr:wpaper:202305
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    References listed on IDEAS

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    JEL classification:

    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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