Tag: Collusion

Perfect Competition or Collusion?

Posted on by Rhys Williams

    I recently interviewed for a Cambridge college as part of the undergrad admissions process and one of the questions I asked was as follows:

    “We have a scenario where two shops (e.g. supermarkets) are selling the same product (e.g. chocolate bar) at the same price, does this necessarily mean that collusion is occurring? What other factors might the authority want information on?”

    I find this to be an interesting question, as there isn’t a right or wrong answer and so it allowed applicants to discuss a wide range of economic phenomena, from market structure to pricing decisions and I wanted to elaborate upon a few of these points here. [...]

    Methods to spot Collusion

    Posted on by Rhys Williams

    http://www.economist.com/news/finance-and-economics/21568364-how-antitrust-economists-are-getting-better-spotting-cartels-scam-busters

    The article above shows some different methods that anti-trust economists are now adopting in order to identify cartels. The main bulk of the article is based on the Benford Law which states that in a large number of populations the leading number is not uniformly correlated as one may expect. Instead the number 1 is much more likely to be a leading number than the number 9. This can be seen from the graph below which shows the probability that the leading number will be the given constant.

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    Anti-trust agencies can use this law to spot whether a firm is creating dubious numbers. [...]

    Television Collusion

    Posted on by Rhys Williams

    6 television firms were recently fined £1.2 Billion for colluding to fix prices of cathode rays in televisions. The result of this collusion was higher prices for consumers and thus larger profits for the television firms.

    The article can be read here.

    This shows the EU Competition Commission using its powers to prevent consumers losing out. It is also worth noting that the television firms undertook this price fixing by increasing the price of cathode rays, as oppose to the price of TVs themselves. Perhaps one reason behind this decision was because it is easier to monitor the price of cathode rays and hence this prevents cheating by any one member of the cartel. [...]