Social Sciences
8 years ago

Fewer firms, more collusion: How small markets breed illegal cartels

Collusion, firm numbers and asymmetries revisited [Bergen]
Luke Garrod, Matthew Olczak

Paper Summary

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The article explores why firms may choose to form illegal cartels instead of colluding tacitly in markets with uncertain demand. The researchers find that in markets with a few similar-sized firms, forming a cartel may not be the best strategy because tacit collusion can be more successful in such markets. This challenges the common belief that illegal cartels are always the most attractive option for firms.