Date of this Version
International Economic Review
The dynamic behavior of a price-fixing cartel is explored when it is concerned about creating suspicions that a cartel has formed. Consistent with preceding static theories, the cartel's steady-state price is decreasing in the damage multiple and the probability of detection. However, contrary to those theories, it is independent of the level of fixed fines. It is also shown that the cartel prices higher when a more competitive benchmark price is used in calculating damages.
This is the peer reviewed version of the following article:Harrington, J. E. (2005), OPTIMAL CARTEL PRICING IN THE PRESENCE OF AN ANTITRUST AUTHORITY*. International Economic Review, 46: 145–169. doi:10.1111/j.0020-6598.2005.00313.x, which has been published in final form at http://dx.doi.org/10.1111/j.0020-6598.2005.00313.x. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving http://olabout.wiley.com/WileyCDA/Section/id-820227.html#terms
Harrington, J. E. (2005). Optimal Cartel Pricing in the Presence of an Antitrust Authority. International Economic Review, 46 (1), 145-169. http://dx.doi.org/10.1111/j.0020-6598.2005.00313.x
Date Posted: 27 November 2017
This document has been peer reviewed.