Global Price Fixing: Our Customers are the Enemy (Studies in by John M. Connor

By John M. Connor

A few books get written, others write themselves. This booklet is the latter sort. i've got committed myselfto learning the industrial association of industries relating to nutrients and agriculture for nearly twenty-five years. it's been my luck to paintings at locations that tolerated my gadfly method of study. as long as I produced a couple of courses every year and wooed a number of graduate scholars to proportion these pursuits, i used to be unfastened to pursue an array of issues: why corporations diversifY, the aggressive function of ads, innovations for promoting in out of the country markets, measuring marketplace strength, and so on. even if firmly anchored within the eclectic analytical framework of business economics and fascinated about the nutrition process, I traversed a large box at will. a few years in the past, I had pretty well confident myself that bare rate solving used to be no longer a excessive precedence for scholarship in those industries. actual, collusion used to be rife in a number of nutrients industries, comparable to bid-rigging between providers of fluid milk to college districts in remoted rural districts. Ripping off milk cash from college teenagers is reprehensible adequate, however the dimension of the industrial losses from localized rate solving paled along with different assets of imperfect festival.

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The antitrust regulatory atmosphere is clearly more frigid in all the major industrialized countries than was the case in the 1980s. Unfortunately, financial penalties are not enough, as is demonstrated by the fact that there were about a dozen corporate or individual price fixers that became repeat offenders. Corporate antitrust compliance programs have the potential for leveraging the deterrence effect of harsh sentences, yet it appears that these lessons are lost in the space of a decade or two as a new generation of corporate leaders take the helm and institutional memories are lost.

Moreover, the supracompetitive price charged by a monopoly results in the transfer of income from buyers to the owners of the monopoly. 5 A monopolist may set a single price, but the size of the transfer can be increased if the monopolist is able to divide demand into distinct groups that are then charged distinct prices; such price discrimination may be on the basis of size of purchases, buyers' income, or each group's sensitivity to price. Oligopoly Firms in perfectly competitive markets have no power over price.

Collusion is one cooperative strategy available to those firms in an oligopoly game. Mathematical game theories vary greatly in the degree of realism embodied in the assumptions (Pearce 1992). Early models assumed that the payoffs were fixed and known with certainty; more recent models allow for variable-sum payoffs in which the total profits can rise or fall as the firms choose alternative strategies. In some, players start out with identical endowments, while in others firms may have access to variable cost configurations.

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