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Screening Adaptive Cartels

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Listed:
  • Juan M. Ortner
  • Sylvain Chassang
  • Kei Kawai
  • Jun Nakabayashi

Abstract

We propose an equilibrium theory of data-driven antitrust oversight in which regulators launch investigations on the basis of suspicious bidding patterns and cartels can adapt to the statistical screens used by regulators. We emphasize the use of asymptotically safe tests, i.e. tests that are passed with probability approaching one by competitive firms, regardless of the underlying economic environment. Our main result establishes that screening for collusion with safe tests is a robust improvement over laissez-faire. Safe tests do not create new collusive equilibria, and do not hurt competitive industries. In addition, safe tests can have strict bite, including unraveling all collusive equilibria in some settings. We provide evidence that cartel adaptation to regulatory oversight is a real concern.

Suggested Citation

  • Juan M. Ortner & Sylvain Chassang & Kei Kawai & Jun Nakabayashi, 2022. "Screening Adaptive Cartels," NBER Working Papers 30219, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30219
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    References listed on IDEAS

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    Cited by:

    1. Clark, Robert & Coviello, Decio & de Leverano, Adriano, 2020. "Complementary bidding and the collusive arrangement: Evidence from an antitrust investigation," ZEW Discussion Papers 20-052, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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