Optimal Cartel Pricing in the Presence of an Antitrust Authority

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Business Economics and Public Policy Papers
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Economics
Public Affairs, Public Policy and Public Administration
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Harrington, Joseph E
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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.

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2005-02-01
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International Economic Review
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