NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Price Cutting and Business Stealing in Imperfect Cartels

B. Douglas Bernheim, Erik Madsen

NBER Working Paper No. 19993
Issued in March 2014
NBER Program(s):IO

Though economists have made substantial progress toward formulating theories of collusion in industrial cartels that account for a variety of fact patterns, important puzzles remain. Standard models of repeated interaction formalize the observation that cartels keep participants in line through the threat of punishment, but they fail to explain two important factual observations: first, apparently deliberate cheating actually occurs; second, it frequently goes unpunished even when it is detected. We propose a theory of "equilibrium price cutting and business stealing" in cartels to bridge this gap between theory and observation.

download in pdf format
   (514 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19993

Published: B. Douglas Bernheim & Erik Madsen, 2017. "Price Cutting and Business Stealing in Imperfect Cartels," American Economic Review, vol 107(2), pages 387-424.

Users who downloaded this paper also downloaded* these:
Glazer, McGuire, and Shi w19998 Risk Adjustment of Health Plan Payments to Correct Inefficient Plan Choice from Adverse Selection
Buera, Fattal-Jaef, and Shin w19997 Anatomy of a Credit Crunch: From Capital to Labor Markets
Menzio and Trachter w19990 Large and Small Sellers: A Theory of Equilibrium Price Dispersion with Sequential Search
Itskhoki and Moll w19994 Optimal Development Policies with Financial Frictions
Fieler, Eslava, and Xu w19992 Trade, Skills, and Quality Upgrading: A Theory with Evidence from Colombia
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us