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Cartel Conduct and Antitrust Compliance with Imperfect Information about Enforcement Risk

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This article models antitrust compliance training as a form of information acquisition. It finds that lower fines may benefit consumers by improving the deterrence of cartels: Sales managers who underestimate the severity of antitrust enforcement sometimes establish cartels that are actually unprofitable for their firms. This risk rises if an antitrust authority lowers the sanctions imposed on anticompetitive conduct. Therefore, it is a best response for firms' compliance officers to establish antitrust training programs to mitigate this risk and prevent cartels. Fines must however not be reduced so strongly as to make anticompetitive collusion profitable. (JEL: D82, K21, K42, L41)
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Keywords: collusion; compliance; enforcement risk; imperfect information

Appeared or available online: 28 July 2017

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