When Cartels Mimic Competition
This paper examines how cartels can design agreements that appear competitive on the surface—such as uniform pricing or matching policies—while still coordinating to maintain high prices and reduce output. The authors develop a framework to identify such mimicry and assess its welfare effects.
Background
- This arXiv economics paper analyzes how cartels — firms secretly colluding to fix prices — can strategically imitate competitive market behavior to evade antitrust detection.
- Regulators typically screen for collusion by looking for patterns like reduced output and elevated prices. The paper's central insight: sophisticated cartels can deliberately match the output and pricing of competitive markets, rendering standard screening tools ineffective.
- The research sits at the intersection of industrial organization, game theory, and antitrust law. It informs debates on detecting collusion in concentrated industries, especially as algorithmic pricing and data-sharing create new coordination channels.