Antitrust as facilitating factor for collusion

Research output: Working paperProfessional

405 Downloads (Pure)

Abstract

We study collusion in an infinitely repeated prisoners' dilemma when firms' discount factor is private information. If tacit collusion is not feasible, firms that are capable of sustaining high prices may still be willing and able to collude explicitly. Firms eager to collude may signal their intentions when forming the agreement is costly, but not too costly. As antitrust makes explicit collusion costly in expected terms, it may in fact function as a signaling device. We show that there always exists a cost level for which explicit collusion is viable. Moreover, our analysis suggests that antitrust enforcement is unable to fully deter collusion.
Original languageEnglish
Place of PublicationMaastricht
PublisherMaastricht University, Graduate School of Business and Economics
Publication statusPublished - 1 Jan 2013

Cite this

Bos, A. M., Letterie, W. A., & Vermeulen, A. J. (2013). Antitrust as facilitating factor for collusion. Maastricht: Maastricht University, Graduate School of Business and Economics.
Bos, A.M. ; Letterie, W.A. ; Vermeulen, A.J. / Antitrust as facilitating factor for collusion. Maastricht : Maastricht University, Graduate School of Business and Economics, 2013.
@techreport{7f49b48bc5fb40fa94316783ed44905a,
title = "Antitrust as facilitating factor for collusion",
abstract = "We study collusion in an infinitely repeated prisoners' dilemma when firms' discount factor is private information. If tacit collusion is not feasible, firms that are capable of sustaining high prices may still be willing and able to collude explicitly. Firms eager to collude may signal their intentions when forming the agreement is costly, but not too costly. As antitrust makes explicit collusion costly in expected terms, it may in fact function as a signaling device. We show that there always exists a cost level for which explicit collusion is viable. Moreover, our analysis suggests that antitrust enforcement is unable to fully deter collusion.",
author = "A.M. Bos and W.A. Letterie and A.J. Vermeulen",
year = "2013",
month = "1",
day = "1",
language = "English",
publisher = "Maastricht University, Graduate School of Business and Economics",
address = "Netherlands",
type = "WorkingPaper",
institution = "Maastricht University, Graduate School of Business and Economics",

}

Bos, AM, Letterie, WA & Vermeulen, AJ 2013 'Antitrust as facilitating factor for collusion' Maastricht University, Graduate School of Business and Economics, Maastricht.

Antitrust as facilitating factor for collusion. / Bos, A.M.; Letterie, W.A.; Vermeulen, A.J.

Maastricht : Maastricht University, Graduate School of Business and Economics, 2013.

Research output: Working paperProfessional

TY - UNPB

T1 - Antitrust as facilitating factor for collusion

AU - Bos, A.M.

AU - Letterie, W.A.

AU - Vermeulen, A.J.

PY - 2013/1/1

Y1 - 2013/1/1

N2 - We study collusion in an infinitely repeated prisoners' dilemma when firms' discount factor is private information. If tacit collusion is not feasible, firms that are capable of sustaining high prices may still be willing and able to collude explicitly. Firms eager to collude may signal their intentions when forming the agreement is costly, but not too costly. As antitrust makes explicit collusion costly in expected terms, it may in fact function as a signaling device. We show that there always exists a cost level for which explicit collusion is viable. Moreover, our analysis suggests that antitrust enforcement is unable to fully deter collusion.

AB - We study collusion in an infinitely repeated prisoners' dilemma when firms' discount factor is private information. If tacit collusion is not feasible, firms that are capable of sustaining high prices may still be willing and able to collude explicitly. Firms eager to collude may signal their intentions when forming the agreement is costly, but not too costly. As antitrust makes explicit collusion costly in expected terms, it may in fact function as a signaling device. We show that there always exists a cost level for which explicit collusion is viable. Moreover, our analysis suggests that antitrust enforcement is unable to fully deter collusion.

M3 - Working paper

BT - Antitrust as facilitating factor for collusion

PB - Maastricht University, Graduate School of Business and Economics

CY - Maastricht

ER -

Bos AM, Letterie WA, Vermeulen AJ. Antitrust as facilitating factor for collusion. Maastricht: Maastricht University, Graduate School of Business and Economics. 2013 Jan 1.