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American Economic Review: Vol. 101 No. 6 (October 2011)

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Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices

Article Citation

Harrington, Joseph E., and Andrzej Skrzypacz. 2011. "Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices." American Economic Review, 101(6): 2425-49.

DOI: 10.1257/aer.101.6.2425

Abstract

Motivated by recent cartel practices, a stable collusive agreement is characterized when firms' prices and quantities are private information. Conditions are derived whereby an equilibrium exists in which firms truthfully report their sales and then make transfers within the cartel based on these reports. The properties of this equilibrium fit well with the cartel agreements in a number of markets including citric acid, lysine, and vitamins. (JEL D43, D82, K21, L12, L61, L65)

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Authors

Harrington, Joseph E. (Johns Hopkins U)
Skrzypacz, Andrzej (Stanford U)

JEL Classifications

D43: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection
D82: Asymmetric and Private Information
K21: Antitrust Law
L12: Monopoly; Monopolization Strategies
L61: Metals and Metal Products; Cement; Glass; Ceramics
L65: Chemicals; Rubber; Drugs; Biotechnology


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