Post-cartel tacit collusion: Determinants, consequences, and prevention

Abstract

We experimentally investigate the attributes and effects of post-cartel tacit collusion (PCTC) as well as policy measures aimed at its prevention. PCTC occurs irrespective of the absence or presence of an antitrust authority and in different competition regimes. PCTC is determined both by collusive price hysteresis and learning about cartel partners' characteristics and strategies. As a result, it is strongly related with the preceding cartel success. The estimation of cartel overcharges, an important factor in litigation, is found out to be biased downwards in the presence of PCTC. As a policy note, we show that debarment of managers involved in cartels from the market can prevent PCTC.

Group size and matching protocol in contests

“…This is argued to be because of reputation and reciprocity effects, which a stranger matching eliminates (Andreoni and Croson 2008). See also Chowdhury and Crede (2020) and the references therein for similar results in market experiments.…”

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

“…They find evidence that firms in four-firm markets form cartels more often than duopolists because of a smaller hysteresis gain if the cartel breaks down. Chowdhury and Crede (2020) study the possibility of post-cartel tacit collusion once a cartel breaks down. The ability of firms to collude tacitly after a cartel is busted may lead to a downward bias in the estimates of damages, and a reduced deterrence effect of fines that are estimated on overcharges.…”

Is Voting for a Cartel a Sign of Cooperativeness?

“…(Cartels are also possibly costly because of the chance of having to pay a fine when they are discovered). The positive effect of cartels for oligopoly firms has been shown experimentally in both Cournot (Waichman et al [18], Fonseca and Normann [19]) and Bertrand games (Hinloopen and Soetevent [20], Chowdhury and Crede [21], Chowdhury and Wandschneider [22] in addition to Apesteguia et al [1] and Gillet et al [2]).…”