Explicit collusion is an agreement among competitors to suppress rivalry that relies on interfirm communication and/or transfers. Rivalry between competitors erodes profits; the suppression of rivalry through collusion is one avenue by which firms can enhance profits. Many cartels and bidding rings function for years in a stable and peaceful manner despite the illegality of their agreements and incentives for deviation by their members. In The Economics of Collusion, Robert Marshall and Leslie Marx offer an examination of collusive behavior: what it is, why it is profitable, how it is implemented, and how it might be detected.
Marshall and Marx, who have studied collusion extensively for two decades, begin with three narratives: the organization and implementation of a cartel, the organization and implementation of a bidding ring, and a parent company’s efforts to detect collusion by its divisions. These accounts—fictitious, but rooted in the inner workings and details from actual cases—offer a novel and engaging way for the reader to understand the basics of collusive behavior. The narratives are followed by detailed economic analyses of cartels, bidding rings, and detection.
The narratives offer an engaging entrée to the more rigorous economic discussion that follows. The book is accessible to any reader who understands basic economic reasoning. Mathematical material is flagged with asterisks.
“Robert Marshall and Leslie Marx bring to this book a deep understanding of the scholarly body of research and an intimate and broad knowledge of actual cartels and collusive practices. While there are many scholars who possess the former, and many practitioners who possess the latter, it is a rare few who are in possession of both sources of insight. The Economics of Collusion delivers one of the most comprehensive and instructive studies of cartels ever written.”
—Joseph Harrington, Johns Hopkins University
“Professors Robert Marshall and Leslie Marx have produced a real gem. Their new book not only explains the challenges that face potential colluders, but the private and social costs of their actions. This is a must read…economic theory, empirics, and storytelling at its very best.”
—Michael R. Baye, Kelley School of Business; Former Director of the Bureau of Economics Federal Trade Commission
“This book provides a very accessible introduction to the economics of collusion. A unique feature is its use of narrative description to demonstrate the inner workings of cartels. The narratives are based on actual cases, which makes the book highly engaging and entertaining. This is a valuable resource for anyone who is interested in the topic.”
—Jay Pil Choi , Department of Economics, Michigan State University
“Using an approach that is both intuitive and meticulous, Robert Marshall and Leslie Marx do a wonderful job explaining how cartels and bidding rings function. Students and practitioners will enjoy reading this informative, innovative, and well-written book.”
—Paolo Buccirossi , Director and Founder of Lear, Rome