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Collusion in the presence of antitrust prosecution: Experimental evidence

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  • Gerlach, Heiko
  • Li, Junqian

Abstract

We conduct an experimental study of cartel behaviour in the presence of an active competition authority. Treatments differ with respect to how responsive the authority is to collusion and suspicious pricing behaviour by firms. Subjects are successful in coordinating strategies to avoid antitrust detection as we observe gradual price increases and staggered pricing conforming with theory. We find that the presence of a more active antitrust regime substantially improves the internal stability of cartels. We attribute this result to the common-enemy (or esprit de corps) effect induced by the threat of cartel prosecution. A more responsive antitrust policy in this experiment provides higher cartel deterrence which lowers both prices for consumers and the cost of antitrust enforcement.

Suggested Citation

  • Gerlach, Heiko & Li, Junqian, 2024. "Collusion in the presence of antitrust prosecution: Experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 222(C), pages 427-445.
    • Handle: RePEc:eee:jeborg:v:222:y:2024:i:c:p:427-445
    DOI: 10.1016/j.jebo.2024.04.021
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    More about this item

    Keywords

    Collusion experiment; Antitrust cartel enforcement; Repeated games; Common-enemy; Esprit de corps;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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