Date of this Version
The Analysis of Competition Policy and Sectoral Regulation
This study investigates when a cartel that uses a sales quota allocation scheme monitors more frequently than it enforces; for example, monitoring of sales is done on a weekly basis but firms are only required to comply with sales quotas on a quarterly basis. In a simple three-period quantity game with i.i.d cost and demand shocks, we show that the volatility of a cartel member's sales follows a U-shape within the compliance horizon. In comparison, sales volatility is constant over time under competition. This result offers a simple empirical test for distinguishing collusion from competition using sales data.
cartel, compliance, non-compliance
Harrington, J. E., & Montero, J. (2014). Cartel Sales Dynamics when Monitoring for Compliance is More Frequent than Punishment for Non-Compliance,. The Analysis of Competition Policy and Sectoral Regulation, 4 http://dx.doi.org/10.1142/9789814616362_0007
Date Posted: 27 November 2017