Read e-book online Global Price Fixing (Studies in Industrial Organization) PDF

By John M. Connor

The ebook describes and analyzes the formation, operation, and affects of contemporary worldwide cartels. It offers a vast photo of the economics, festival legislations and historical past of overseas expense solving. A deeper knowing of the phenomenon is afforded via in depth case experiences of collusion within the markets for lysine, citric acid, and supplements. specific realization is given to the industrial accidents sustained through the cartels' shoppers. the writer assesses no matter if antitrust enforcement through the ecu Union, the us, and different nations is able to deterring cartels within the foreseeable destiny.

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Regular sharing of firm-level sales data can nullify the destabilizing effect of demand shocks. Quarterly or monthly monitoring of sales or production is a common feature of private cartels. Alternatively, sales reports can be provided by trusted third parties, such as independent accounting firms, industry trade associations, or government statistical agencies. Albaek et al. (1997) provide a concrete case of government transactions data that promoted collusion. Finally, there are models that predict that long-term duration is enhanced by certain future cyclical growth patterns (Bagwell and Staiger 1997).

In the cases of regular seasonal demand, both formation and stability are improved by raising prices just before seasonal demand would raise prices anyway. In general unexpected non-seasonal growth favors the formation of cartels, whereas stable growth helps cartel sustainability (Haltwanger and Harrington 1991). Surges in growth are expected to lead to increases in capacity utilization (decreases in excess capacity). The traditional view is that, like monopolists, collusive arrangements would require a “passive sales” rule; that is, rather than adjust price or volume in the face of demand perturbations, collusive firms would want to absorb the changes by building up inventories or increasing orders backlogs (Scherer and Ross 1990).

Cooperation is rewarded by higher profits, but deviation from monopoly output levels is punished by reverting to non-cooperative conduct (often Cournot equilibria) that will generate lower profits. Recent models have been able to incorporate environmental uncertainty and learning by the players over time. Game-theory models have some limitations for the study of cartels. They tend to result in ambiguous conclusions about the role of market and firm characteristics; put another way, predictions about market equilibria depend crucially upon often small changes in assumptions or parametric values.

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