Index

• Aggravating factors, fines levied and, 70–71
• American Tobacco Co. v. United States, 113n3
• Amnesty Plus, 101–102, 117n18
• Aoyagi, Masaki, 50
• Athey, Susan, 50
• Audit policies, 116n4
• Australia, competition law in, 16
• Awaya, Yu, 50, 51, 52

• Bagwell, Kyle, 50
• Baker, Jonathan B., 77
• Balanced temptation, 12
• Base, used for determining penalties, 71, 72, 75–76
• Bell Atlantic Corp. v. Twombly, 116n5
• Bernheim, B. Douglas, 100
• Bertrand price game, 11
• cartel participation in, 29–31
• exploring optimal design of penalties in, 71–76
• impact of competition policy on markets and cartel stability in, 22–23
• leniency before and after investigation in, 92–94
• optimal cartel price, 44–45
• Besanko, David, 15, 64, 68, 78
• Bidding rings at auctions, optimal competition policy and, 69
• Bos, Iwan, 29, 30, 35, 36
• Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 113n12
• Buccirossi, Paulo, 22, 103
• But-for price, 16
• Buyers
• customer damages and, 76–77, 79–82
• in dynamic models, 45–46, 49

• Canada, competition law in, 3
• Career concerns of competition authority, 108
• Cartel Amnesty Effect, 90–92, 105
• Cartels
• defining stable cartel, 30
• formation and duration of, 19–28
• impact of competition policy on cartel size and participation, 28–31, 58
• impact of competition policy on participation rate, 23–28
• impact of competition policy on set of markets for which collusion is stable, 20–23
• leniency programs and, 82–99
• modeling birth and death of, 23–28
• post-cartel phase, 82–87
• pre-cartel phase, 94–99
• price wars, 55
• Cartel stability
• competition law and enforcement and, 30–31
• leniency programs and, 90–91, 105
• penalties and, 38, 43
• Chan, Jimmy, 50
• Chang, Myong-Hun
• on competition policy and duration of cartels, 109
• on effectiveness of leniency programs in reducing number of cartels, 95–99
• modeling birth and death process of cartels, 20, 23
• testing policy efficacy, 27–28
• Cheap talk messages, collusion and, 50–51, 52
• Chen, Joe, 15, 45–46, 49
• Chen, Zhijun, 19, 92, 101
• Chen, Zhiqi, 102
• Chile, competition law in, 16
• Choi, Jay Pil, 100
• Clamp-All Corp. v. Cast Iron Soil Pipe, 113n8
• Collusion
• competition law and enforcement and understanding of, 56–57
• conscious parallelism, 6
• defining, 1–8
• determining what types are illegal, 62
• explicit, 6, 7, 114n17
• multimarket, 99–102
• tacit, 6, 7–8, 114n17
• unlawful, 3–7
• Collusive equilibria, 13
• competition law and enforcement impact on, 20–23
• construction of, 96
• deviation payoff and, 21–22
• leniency programs and, 88–89
• trigger price and, 54–55
• with and without communication, 49–56, 113n15, 115n23
• Collusive price, 31–56
• affecting probability of detection and conviction of collusion, 14
• collusive equilibria with and without communication, 49–56
• dynamic game with state variables and endogenous detection technology, 45–49
• dynamic game with state variables and exogenous detection technology, 38–45
• effect of leniency programs on, 87–88
• Collusive price path
• discount factor’s impact on, 43–44
• probability of detection and, 42–43
• Communication
• collusive equilibria with and without, 49–56, 113n15, 115n23
• to limit competition, 5–6
• Competition
• firms’ agreement to limit, 4–5
• firms’ communication about limiting, 5–6
• Competition authority (CA), 11
• career concerns of, 108
• in dynamic models, 45
• information and decision to investigate, 86–87
• leniency programs and variation in enforcement, 88–92
• optimal enforcement and, 103–104
• optimal policy design and, 64, 65–66
• penalties and, 15
• prosecution effect and, 84–85
• prosecution of alleged collusion and, 14 15, 64–69
• sharing information on multimarket cartels, 100
• trade-offs faced by, 69–70
• Competition law and enforcement, 3–4. See also Enforcement
• cartel stability and participation and, 30–31
• in static oligopoly model of collusion, 13–17
• understanding of collusion and, 56–57
• Competition policy. See also Optimal competition policy
• cartel formation and duration, 19–28
• cartel size and cartel participation and, 28–31, 58
• effectiveness of collusion and, 14
• maximizing social welfare, 65–66
• measuring impact of, 108–109
• price and, 58–59 (see also Collusive price)
• summary of findings, 56–59
• testing efficacy of, 27–28
• Conscious parallelism, 6
• Conviction
• of alleged collusion, 13, 14, 15, 16
• effect of competition policy on, 57, 58, 61–62
• leniency programs and, 82, 83, 84, 86–87, 88, 92, 94, 98–99, 101–102, 103
• penalties and, 20, 25, 31, 32–33, 39, 41, 63–64
• price and, 32–33, 39, 79
• recidivism and, 28, 72, 89
• Corporate leniency programs. See Leniency programs
• Corporate Leniency Program (US), 82, 103
• Corporate penalties, 15. See also Penalties/penalization
• Costs
• enforcement, 69–70
• firms’ private information on, 50–51
• prosecution, 64–65, 66, 67–69
• Cost shocks, 46, 59
• Customer damages, 16, 17, 76–82, 104
• prohibition of indirect purchaser suits and bias from damage estimation, 79–82
• US formula for, 81
• welfare effects of damages with sophisticated customers, 76, 77–79, 82
• Cyrenne, Philippe, 36–38

• DeSanti, Susan S., 4
• Detection, of suspected collusion, 13–14, 15, 62
• competition authority’s decision to investigate, 86–87
• price and likelihood of, 32, 37–38
• price history and, 39–40
• setting steady-state collusive price and, 42–43
• suspicious buyers and, 45–47, 49
• Detection technology
• endogenous, 45–49
• exogenous, 38–45
• Deterrence of cartel formation, market instability and, 22
• Deviation payoffs, 21–22
• Deviator Amnesty Effect, 90–92, 105
• Direct effect, from competition policy, 57
• Direct purchasers, customer damages and, 76–77, 79–81
• Discount factor, impact on collusive price path, 43–44
• Dying cartels, leniency programs and, 97, 98–99
• Dynamic game with state variables
• endogenous detection technology, 45–49
• exogenous detection technology, 38–45

• Eligibility, for leniency programs, 102–103
• Ellis, Christopher J., 90
• Endogenous detection technology, 45–49
• Enforcement. See also Competition law and enforcement
• allocation of resources for, 62–63
• costs of, 69–70
• incentives to apply for leniency and, 88–92
• optimal, 63–70
• stages of, 62
• Equilibrium strategy profiles, cartel participation and, 29
• European Commission
• fines levied by, 70–71, 76
• penalty formulas, 15–16, 17
• European Union
• competition law, 4
• customer damages and, 76, 77
• leniency after investigation, 92
• leniency program, 82, 92
• Evidentiary standards
• defining, 61–62
• integrating into models of collusion, 109–110
• Exogenous detection technology, 38–45
• Explicit collusion, 6, 7, 114n17

• Fairness, customer damages and, 77
• Firms
• decision to cartelize, 64–65, 66
• private information on costs and, 50–51
• Firm size, punishment and, 55–56
• Future research, areas for, 107–110

• Game-theoretic framework, cartel formation and duration and, 19–28
• Game-theoretic modeling issues, 11–17
• Game theory, definition of collusion in, 2–3
• Garrod, Luke, 55
• Gärtner, Dennis, 86, 88
• Gerlach, Heiko, 50, 100
• Germany, competition law in, 16
• Ghosh, Subhadip, 102
• Government fines, design of, 70–76. See also Penalties/penalization
• Green, Edward J., 36, 54, 55
• Green-Porter model, 55, 116n4

• Harrington, Joseph E., Jr., 40
• on applications for leniency, 83, 85–86, 88
• on communication to coordinate collusion, 50, 53
• on competition policy and duration of cartels, 109
• on effectiveness of leniency programs in reducing number of cartels, 95–99
• on effect of discount factor on equilibrium price path, 44
• endogenous detection and, 45–46, 49
• on influence of competition policy on cartel size and participation, 29, 30
• modeling birth and death process of cartels and, 20, 23
• on penalties, 17
• on probability of discovery, 15
• on probability of investigation, 14
• on side effects of customer damages, 81
• testing policy efficacy, 27–28
• Houba, Harold, 44

• Incentive compatibility constraint, 115n13, 115n24
• Indirect-deterrence effects, from competition policy, 57
• Indirect-price effects, from competition policy, 57
• Indirect purchasers, customer damages and, 76–77, 79–82
• Individual Leniency Program, 117n13
• Individual penalties, 15
• Industries, effect of leniency programs across, 98–99
• Infinite-horizon oligopoly price setting, detection technology embedded in, 47–49
• Infinitely repeated Bertrand price game, optimal cartel price to static Nash equilibrium price and, 44–45
• Infinitely repeated oligopoly game, impact of competition policy on collusive price in, 33–38
• Information
• collusion and sales, 51–52, 54
• decision to investigate and competition authority’s, 86–87
• firms and private, 50–51
• sharing, on multimarket cartels, 100
• Instigator eligibility, 102–103
• Investigation, leniency before and after, 92–94

• Joint profit maximization, 12, 116n4

• Kaplow, Louis, 4, 109
• Katsoulacos, Yannis, 28, 57, 71
• Krishna, Vijay, 50, 51, 52

• LaCasse, Chantale, 15, 69
• Lefouili, Yassine, 101
• Legal cartels
• impact of competition policy on collusion, 35–36, 58
• price and, 37, 59
• Leniency programs, 82–103, 104–105
• before and after investigation, 92–94
• cartel phase and, 87–94
• eligibility and other issues, 102–103
• measuring effectiveness of, 108
• multimarket collusion and, 99–102
• post-cartel phase and, 82–87
• pre-cartel phase and, 94–99
• variation in enforcement and, 88–92
• Liability
• communication and proving, 52
• defining, 61–62
• integrating into models of collusion, 109–110

• Managers, as missing element in cartel models, 107
• Market allocation, as collusive outcome, 31
• Market conditions to deter collusion, 71
• Markets, impact of competition policy on markets for cartel stability, 20–23
• Markov perfect equilibrium (MPE), 40–41
• Markov process, 26, 96
• Markups, 35–36, 58, 114n11
• Marshall, Robert C., 100, 101
• Marvão, Catarina, 103
• Marx, Leslie M., 100, 101
• McCutcheon, Barbara, 38
• Meetings, detection of suspected collusion and frequency of, 14
• Mezzetti, Claudio, 100, 101
• Mitigating factors, fines levied and, 70–71
• Monsanto Co. v. Spray-Rite Serv., 113n4
• Motchenkova, Evgenia, 28, 44, 57, 71
• Motta, Massimo, 90
• Mouraviev, Igor, 54, 55, 56
• Multimarket collusion, leniency program and, 99–102

• Nash Bargaining Solution, 12, 13
• Nash equilibrium. See also Static Nash equilibrium
• as competitive benchmark, 3
• stage game, 3, 7, 16, 33–34, 81
• n-firm Prisoners’ Dilemma. See also Prisoners’ Dilemma
• impact of competition policy on cartel rate in, 23–24
• impact of competition policy on markets and cartel stability in, 20–22
• Noncollusive price path, 47–49, 115n18
• Notation, 111

• Olczak, Matthew, 55
• Oligopoly model of collusion
• competition law and enforcement in static, 13–17
• impact of competition policy on collusive price in infinitely repeated, 33–38
• Optimal competition policy, 61–105
• customer damages, 76–82
• modeling issues, 61–63
• optimal enforcement, 63–70
• optimal penalty design, 70–76
• summary of findings, 103–105
• Ormosi, Peter L., 109
• Overcharge, penalty design and, 71, 72–73, 74–76
• Overcharge-based formula, 72–73, 74–75, 116n9

• Pareto efficiency, 12
• Penalties/penalization, 15–16, 62. See also Customer damages
• applying for leniency and, 84
• base used for determining, 71, 72, 75–76
• classes of regimes, 68
• corporate, 15
• cumulative nature of, 38–39
• customer damages, 76–82
• impact on market set for stable collusion, 20–22
• incentive compatibility constraint and, 115n13
• individual, 15
• modeling stages of, 109
• optimal design of, 63, 70–76
• optimal policy and, 66
• price and magnitude of, 32, 34–35
• price history and size of, 39
• setting steady-state collusive price and, 42
• socially optimal, 63
• Penalty formulas, 15–17
• overcharge-based, 72–73, 74–75, 116n9
• Penalty Plus, 100–101
• Polo, Michele, 90
• Porter, Robert H., 36, 54, 55
• Post-cartel phase, effect of leniency programs on, 83–87
• Pre-cartel phase, leniency programs and, 94–99
• Preemption effect, 85, 86, 104
• Price. See also Collusive price
• but-for, 16
• buyer acceptance of increases in, 32, 39, 115n25
• competition policy and, 58–59
• mutual beliefs and constraints on, 53
• trigger, 54–55
• Price history
• buyers and, 46–47, 49
• size of penalty and, 39
• Price leadership scheme, 53
• Price wars, 2, 37, 55, 59
• Prisoners’ Dilemma, 11. See also Bertrand price game; n-firm Prisoners’ Dilemma
• cartel collapse in, 28
• leniency programs and variation in enforcement, 88–89
• Profit
• cartel stability and, 25
• impact of competition policy on cartel rate and, 23–26
• penalty design and, 71, 72, 73
• risk of prosecution and, 66–67
• Profit-based penalty, 68
• Prosecution effect, 84–85
• Prosecution of collusion, 13–15, 62
• costs of, 64–65, 66, 67–69
• decision to prosecute, 64–68
• expected profit and risk of, 66–67
• Punishment for collusion, 1–2. See also Penalties/penalization
• collusive equilibria and, 56
• competition policy and, 36–38
• firm size and, 55–56

• Race to the Courthouse Effect, 91–92, 105, 117n14
• Research, areas for future, 107–110
• Reuter, Tim, 103
• Revenue, penalty design using, 71, 72, 73–74
• Revenue-based penalty, 68
• Rewards for collusion, 1–2
• Rey, Patrick, 19, 92, 101
• Risk dominance, equilibrium selection and, 102–103
• Ross, Thomas W., 102
• Rotemberg, Julio J., 23, 24
• Roux, Catherine, 101
• Rüggeberg, Jakob, 80

• Salant, Stephen W., 77
• Sales, collusion and information about, 51–52, 54
• Saloner, Garth, 23, 24
• Sauvagnat, Julien, 86, 103
• Schinkel, Maarten Pieter, 15, 68, 80
• Shareholders, competition policy issues and, 107
• Sherman Act (1890), 3–4, 5
• Side payments, 12
• Silbye, Frederik, 86
• Skrzypacz, Andrzej, 50
• Social cost of prosecution, 64–65
• Social welfare
• effects of customer damages on, 76, 77–79, 82
• maximizing, as goal of competition policy, 61
• Souam, Said, 15, 68
• Spagnolo, Giancarlo, 22, 82, 90, 103
• Spector, David, 50, 51, 52
• Spulber, Daniel F., 15, 64, 68, 78
• Stable cartel, 30
• Stage game Nash equilibrium, 3, 7
• collusive price in infinitely repeated game and, 33–34
• penalty from conviction and, 16
• post-cartel competitive price and, 81
• State variables, impact of competition policy on collusive price with, 38–49
• Static Nash equilibrium, 3, 6–7, 13, 20
• price and, 12, 16, 29, 39, 44–45, 55, 88
• Static oligopoly model, collusion in, 11–17
• collusion introduced into, 11–13
• competition law and enforcement, 13–17
• Supracompetitive outcome, collusion and, 1, 2, 3
• Supracompetitive prices, mutual beliefs and, 53

• Tacit collusion, 6, 7–8, 114n17
• TFEU (Treaty on the Functioning of the European Union), 4
• Trade-offs faced by competition authority, 69–70
• Trigger price, 54–55
• Tuinstra, Jan, 15, 68, 80

• Ulph, David, 28, 57, 71
• United States
• Amnesty Plus program, 101–102, 117n18
• competition law in, 3
• Corporate Leniency Program, 103
• customer damages formula, 81
• customer damages in, 76, 77, 79–80
• Individual Leniency Program, 117n13
• leniency before and after investigation, 92
• leniency programs, 82, 101–102, 103, 117n13, 117n18
• maximum potential fine, 116n6
• penalty formulas, 16, 17
• Penalty Plus program, 100–101
• U.S. Supreme Court, on agreement to limit competition, 4, 5
• United States v. Topco Assocs., 113n1
• Unlawful collusion
• defining, 3–7
• economic collusion vs., 6–7
• price and, 37

• Wen, Quan, 44
• Werden, Gregory J., 4
• Whinston, Michael D., 100
• Wilson, Wesley W., 90

• Yao, Dennis A., 4

• Zhang, Wenzhang, 50