The Theory of collusion and competition policy / Joseph E. Harrington Jr.

Includes bibliographical references (pages 113-126) and index.

This book reviews the theoretical research on unlawful collusion, with a focus on two issues: the impact of competition law and enforcement on whether, how long, and how much firms collude; and the optimal design of competition law and enforcement. It begins by discussing general issues that arise when models of collusion take into account competition law and enforcement. It goes on to consider game-theoretic models that encompass the probability of detection and penalties incurred when convicted, and examines how these policy instruments affect the frequency of cartels, cartel duration, cartel participation, and collusive prices. The book then considers the design of competition law and enforcement, examining such topics as the formula for penalties and leniency programs. The book concludes with suggested future lines of inquiry into illegal collusion.