Cartel: Organization, Incentives and Deterrence Policy
Abstract
The necessity and efficiency of cartels resistance are specified not only by their external economics but also by their internal economics, especially by the mechanisms that ensure the contract adherence and the adjustment of parties to new conditions. It was shown that proper cartel identification is either important or complex problem. Its solution requires application of modern economic theory tools to decrease the probability of law enforcement errors. Cartels could be expressed in terms of hybrid institutional agreements and corresponding incomplete contracts. Simplified approach to the qualification of the horizontal connections between competitors in the form of cartels leads to significant risk of the type I errors, and hence negative effect on competition, on the probability of efficient agreements creation and on the companies’ abilities to look for the competitive advantages for price formation. The possible sources of the type I error are the following: the law standards of agreements qualification, standardized arguments for the determination of the antitrust law infringements and the degree of the offenders’ guilt; the particularities of the administrative system that works “by complains”, the discussion of the criminal law out of the pocket of connected changes (“the forth antitrust pocket”). As far as the leniency programs accompany cartels resistance, it was shown how the chosen version of the leniency program (corporate and individual) could decrease the efficiency of the market cartelization deterrence, including the managers’ incentives setting and the deterioration of competition conditions.
Keywords:
cartel, hybrid institutional agreements, type I and II errors, corporate governance, leniency program, managers’ incentives
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Articles of the Russian Management Journal are open access distributed under the terms of the License Agreement with Saint Petersburg State University, which permits to the authors unrestricted distribution and self-archiving free of charge.