IDEAS home Printed from https://ideas.repec.org/p/tin/wpaper/20030104.html
   My bibliography  Save this paper

Cartel Stability with Time-dependent Detection Probabilities

Author

Listed:
  • J. Hinloopen

    (Faculty of Economics and Econometrics, Universiteit van Amsterdam)

Abstract

To account for the illegal nature of price-fixing agreements, detection probabilities are introduced in a dynamic oligopoly. It follows that for a trigger strategy to sustain a non-cooperative collusive equilibrium as a SPNE both the discount rate and all per-period detection probabilities have to be `low enough'. Also, the domain reduces for which strictest incentive compatibility constraint is binding of the concomitant non-stationary supergame if (i) any per-period detection probability increases, (ii) prospective fine payments are increased, (iii) the period of limitation is reduced for violating antitrust laws.

Suggested Citation

  • J. Hinloopen, 2003. "Cartel Stability with Time-dependent Detection Probabilities," Tinbergen Institute Discussion Papers 03-104/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20030104
    as

    Download full text from publisher

    File URL: https://papers.tinbergen.nl/03104.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 38(1), pages 1-12.
    2. Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-536, August.
    3. Motta, Massimo & Polo, Michele, 2003. "Leniency programs and cartel prosecution," International Journal of Industrial Organization, Elsevier, vol. 21(3), pages 347-379, March.
    4. Verboven, Frank, 1998. "Localized Competition, Multimarket Operation, and Collusive Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 371-398, May.
    5. von Ungern-Sternberg, Thomas, 1988. "Cartel Stability in Sealed Bid Second Price Auctions," Journal of Industrial Economics, Wiley Blackwell, vol. 36(3), pages 351-358, March.
    6. Ghosal, Vivek & Gallo, Joseph, 2001. "The cyclical behavior of the Department of Justice's antitrust enforcement activity," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 27-54, January.
    7. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
    8. Owen R. Phillips & Charles F. Mason, 1996. "Market Regulation and Multimarket Rivalry," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 596-617, Autumn.
    9. Charles F. Mason & Owen R. Phillips, 2002. "In Support of Trigger Strategies: Experimental Evidence from Two‐Person Noncooperative Games," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 685-716, December.
    10. Segerstrom, Paul S., 1988. "Demons and repentance," Journal of Economic Theory, Elsevier, vol. 45(1), pages 32-52, June.
    11. Harrington, Joseph Jr., 1989. "Collusion among asymmetric firms: The case of different discount factors," International Journal of Industrial Organization, Elsevier, vol. 7(2), pages 289-307, June.
    12. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    13. James W. Friedman & Jacques-Francois Thisse, 1993. "Partial Collusion Fosters Minimum Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 24(4), pages 631-645, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hinloopen, Jeroen, 2006. "Internal cartel stability with time-dependent detection probabilities," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1213-1229, November.
    2. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    3. Chaim Fershtman & Ariel Pakes, 2000. "A Dynamic Oligopoly with Collusion and Price Wars," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 207-236, Summer.
    4. Frank Verboben, 1997. "Localized Competition, Multimarket Operation and Collusive Behavior," CIG Working Papers FS IV 97-03, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    5. Panayiotis Agisilaou, 2013. "Collusion in Industrial Economics and Optimally Designed Leniency Programmes - A Survey," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-03, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    6. Jeroen Hinloopen & Adriaan Soetevent, 2006. "Trust and Recidivism; the Partial Success of Corporate Leniency Program in the Laboratory," Tinbergen Institute Discussion Papers 06-067/1, Tinbergen Institute.
    7. Stefano Colombo, 2016. "Mixed oligopolies and collusion," Journal of Economics, Springer, vol. 118(2), pages 167-184, June.
    8. Wright, Julian, 2013. "Punishment strategies in repeated games: Evidence from experimental markets," Games and Economic Behavior, Elsevier, vol. 82(C), pages 91-102.
    9. António Brandão & Joana Pinho & Hélder Vasconcelos, 2014. "Asymmetric Collusion with Growing Demand," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 429-472, December.
    10. Hinloopen, Jeroen & Onderstal, Sander, 2014. "Going once, going twice, reported! Cartel activity and the effectiveness of antitrust policies in experimental auctions," European Economic Review, Elsevier, vol. 70(C), pages 317-336.
    11. Emilie Dargaud, 2006. "Mergers and collusion with asymmetric capacities," Post-Print halshs-00140138, HAL.
    12. Marcel Canoy & Patrick Rey & Eric van Damme, 2004. "Dominance and Monopolization," Chapters, in: Manfred Neumann & Jürgen Weigand (ed.), The International Handbook of Competition, chapter 7, Edward Elgar Publishing.
    13. Allain, Marie-Laure & Boyer, Marcel & Kotchoni, Rachidi & Ponssard, Jean-Pierre, 2015. "Are cartel fines optimal? Theory and evidence from the European Union," International Review of Law and Economics, Elsevier, vol. 42(C), pages 38-47.
    14. Lambertini, Luca & Marattin, Luigi, 2021. "On prices’ cyclical behaviour in oligopolistic markets," Research in Economics, Elsevier, vol. 75(1), pages 79-86.
    15. Furusawa, Taiji, 1999. "The negotiation of sustainable tariffs," Journal of International Economics, Elsevier, vol. 48(2), pages 321-345, August.
    16. Robert Gagné & Simon van Norden & Bruno Versaevel, 2003. "Testing Optimal Punishment Mechanisms Under Price Regulation: the Case of the Retail Market for Gasoline," CIRANO Working Papers 2003s-57, CIRANO.
    17. Brito, Duarte & Ribeiro, Ricardo & Vasconcelos, Helder, 2018. "Quantifying the coordinated effects of partial horizontal acquisitions," European Economic Review, Elsevier, vol. 110(C), pages 108-149.
    18. Jeroen Hinloopen & Adriaan R. Soetevent, 2008. "Laboratory evidence on the effectiveness of corporate leniency programs," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 607-616, June.
    19. Stefano Colombo, 2009. "The unidirectional Hotelling model with spatial price discrimination," Economics Bulletin, AccessEcon, vol. 29(4), pages 3031-3040.
    20. Andersson, Ola, 2006. "Bargaining in Collusive Markets," Working Papers 2006:21, Lund University, Department of Economics.

    More about this item

    Keywords

    Cartel stability; trigger strategy; detection probabilities; period of limitation;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tin:wpaper:20030104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tinbergen Office +31 (0)10-4088900 (email available below). General contact details of provider: https://edirc.repec.org/data/tinbenl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.