| Abstract: |
Traditional economic theory of collusion assumed that cartels are inherently
unstable, and yet some manage to operate for years or even decades. While the
literature has presented several determinants of cartel stability, the vast
majority focuses on firms as entities, even though cartels are typically
formed between individuals who need to develop structures that allow them to
establish trust and ensure cooperation. We analyze 15 German cartels, focusing
on the individual participants, the communication and internal structures
within the cartels as well as their breakup. Our results indicate that cartel
members are highly homogeneous and often rely on existing networks within the
industry. Most impressively, only two of the 156 individuals involved in these
15 cartels were female, suggesting that gender also plays a role for cartel
formation. We further identify various forms of communication and divisions of
responsibilities and show that leniency programs are a powerful tool in
breaking up cartels. Based on these results we discuss implications for
competition policy and further research. |