by Jim Rose in industrial organisation, law and economics, Richard Posner Tags: cartels

Posner and Easterbrook suggest that these industry behaviours together are suspicious.

Fixed relative market shares among top firms over time. Declining absolute market shares of the industry leaders. Persistent price discrimination. Certain types of exchanges of price information. Regional price variations. Identical sealed bids for tenders. Price, output, and capacity changes at the time of the suspected initiation of collusion. Industry-wide resale price maintenance or non-price vertical restraints. Relatively infrequent price changes; smaller price reactions as a result of known cost changes. Demand is highly responsive to price changes at market price. Level and pattern of profits relatively favourable to smaller firms. Particular pricing and marketing strategies.

Aaron Director’s most creative suggestion of evidence of price collusion is disputes between the marketing and finance departments of a large company. The market department wants to cut prices because there would be a large increase in sales. The finance department says no because this would take the price below the monopoly or agreed cartel price.