Cartel stability with time-dependent detection probabilities

Jeroen Hinloopen, University of Amsterdam

To account for the illegal nature of price-fixing agreements, detection
probabilities are introduced in a dynamic oligopoly. It follows
that for a trigger strategy to sustain a non-cooperative collusive equilibrium
as a SPNE both the discount rate and all per-period detection
probabilities have to be ‘low enough’. Also, the domain reduces
for which strictest incentive compatibility constraint is binding of the
concomitant non-stationary supergame if (i) any per-period detection
probability increases, (ii) prospective fine payments are increased, (iii)
the period of limitation is reduced for violating antitrust laws.

Date: 31 March-00 0000