Horizontal agreements
橫向協議

Competition Policy and Economic Regulation
競爭政策和經濟調控

Learning objectives
學習目標

• To outline what collusive behaviour is and when it arises.
  概括何為共謀行為及它何時出現。

• To distinguish between the alternative forms of collusive behaviour.  
   區分其他形式的共謀行為。
 
• To identify the different approaches competition authorities use to combat the alternative forms of collusive behaviour. 
  確定不同的方法競爭當局用來打擊其他形式的共謀行為。

• To examine the features of two recently detected cartels.
  檢測最近兩個卡特爾檢查功能。

What is collusion?
何為共謀？

• For economists, collusion is a market outcome – ‘high prices’
• Collusion:
- requires repeated interaction
- results in higher prices than equilibrium prices if firms only meet once.
• Competition authorities consider only some forms of collusion to be illegal.

Models of collusion
共謀的形式

Consider a market with 2 identical firms:  
考慮市場有2個相同的企業：

- The firms produce homogenous products at a marginal cost  of c and have no capacity constraints.
 
- Each period M buyers will each buy 1 unit of the product as long as p≤£10.

• Absent collusion, Bertrand competition results in: p=c   

• The 2 firms would like to collude on p=£10. Assume they then share the market i.e. sales of M/2 each.

• The problem is that each firm has an incentive to cheat:
 
Set p=£9.99 and sell to ALL M buyers

• In order to prevent cheating:
- It must be possible for a rival to detect a deviation
- A cheating firm can then be punished – aggressive behaviour (e.g. set p=c forever).  This results in foregone profits for the cheating firm.
• As long as firms are sufficiently patient, collusive behaviour is possible.  

Factors that facilitate collusion
促進相互勾結的因素

2 important factors that affect the likelihood of collusion are:
2個重要的因素，影響合謀的可能性：

  1) Firm numbers
  2) Degree of symmetry between firms

1)  Firm numbers
    事務所號碼

• Allowing for N firms in the earlier example:
 Collusive sales = M/N
 Sales if deviate = M

As N increases the incentive to deviate increases
 
 Punishment profits = 0 regardless of N#p#分頁標題#e#
 (rival(s) can set p=c forever)

2)  Symmetry
    對稱性

• Consider 2 firms with different production capacities
• 
The firm with the larger capacity:

- Has a higher incentive to deviate
- Faces a less severe punishment
 
A transfer of capacity from the largest to the smallest firm would make collusion easier

Alternative forms of collusion
其他形式的共謀

• Cartel: communication between firms with agreement to fix prices. ILLEGAL e.g. fines of over £15m imposed by the OFT on replica kit retailers in 2003.
• Tacit collusion: mutual understanding that high prices benefits everybody.

Coordination
對等

• Firms need to know what they are colluding on
- earlier example assumed common knowledge collusive p=£10
- The coordination problem may be difficult to solve under tacit collusion.
- has a rival cheated or perceived a different collusive price?
- rely on focal points?
 
• Coordination harder as firm numbers increase 
• Talking to each other may aid coordination
- cheap talk?
- threat of detection

Cartels are per-se illegal
卡特爾為本身違法

NO efficiency justifications
Exploit consumers , harm welfare
Quote from a participant in the lysine cartel:
“Our competitors are our friends. Our customers are the enemy.”