How do antitrust regimes impact on cartel formation and managers’ labor market? An experiment

Do Sanctions or Moral Costs Prevent the Formation of Cartel-Type Agreements?

“…The effects of sanctions and detection probabilities on collusion have been studied by Bigoni et al (2012), Bigoni et al (2015), Chowdhury et al (2018), Chowdhury et al (2020) and Fonseca et al (2022). Bigoni et al (2012) demonstrate that fines have a significant deterrent effect, but also have a pro-collusive effect because the presence of sanctions schemes is associated with an increase in cartel prices.…”

“…Detection is possible either in the period in which the agreement is formed or in subsequent periods provided that it has not been detected before. Fonseca et al (2022) explore the impacts of different antitrust regimes on managers' labor contracts and they compare legal regimes in which firms are fined with legal regimes in which managers are prosecuted.…”

“…First, further developments on the role of sanctions have highlighted that the difficulty to disincentive cartel-type practices is influenced by the fact that the interests of managers may not be aligned with those of shareholders (Jensen and Meckling 1976). Recent works on remuneration schemes show that they can generate perverse economic incentives, as well as psychological and social responses that motivate counterproductive behaviors such as fraud (Larkin and Pierce 2016) and anticompetitive practices (Fleckinger et al 2013;Fonseca et al 2022). Second, in addition to the role of incentives and sanctions in cartel-type decisions, previous works have investigated the role of psychological and behavioral factors in explaining such decisions.…”

“…Chowdhury et al (2020) rely on a setting similar, but after an initial phase of communication, the ability to agree on price-fixing is removed and participants are only able to tacitly collude. Fonseca et al (2022) rely on an infinitely repeated Bertrand oligopoly game and employ a laboratory experiment in which cartels are operationalized through the ability of managers to verbally communicate. Andres et al (2021) use a discrete three-player Bertrand price-setting game and introduce an experimental design that includes the option to communicate without automatically running the risk of being convicted for forming a cartel.…”