The strategic interaction between cartels and anti-trust authorities

We present a model of the interaction between firms agreeing on a degree of collusion and a competition authority that simultaneously determines the allocation of resources to enforcement of anti-trust legisla-tion. An increase in demand is associated with tougher enforcement and a lower degree of collusion. A stronger competitive pressure first decreases the degree of collusion and increases the level of enforcement, then increases both the degree of collusion and the level of enforcement, and eventually increases the degree of collusion and decreases the level of enforcement. Simulation results indicate that a move from the EU penalty regime to the tougher US standard with treble damages would mainly impact on the enforce-ment intensity and to a much lesser extent affect the degree of collusion.(c) 2022 The Author(s). Published by Elsevier Inc. CC_BY_4.0