University of Pennsylvania ScholarlyCommons Business Economics and Public Policy Papers Wharton Faculty Research 2006 How Do Cartels Operate? Joseph E. Harrington Jr University of Pennsylvania Follow this and additional works at: https://repository.upenn.edu/bepp_papers Part of the Business Commons, Economics Commons, and the Public Affairs, Public Policy and Public Administration Commons Recommended Citation Harrington, J. E. (2006). How Do Cartels Operate?. Foundations and Trends in Microeconomics, 2 (1), 1-105. http://dx.doi.org/10.1561/0700000021 At the time of publication, author Joseph E. Harrington, Jr. was affiliated with Johns Hopkins University. Currently (August 2017), he is a faculty member at the Wharton School at the University of Pennsylvania. This paper is posted at ScholarlyCommons. https://repository.upenn.edu/bepp_papers/69 For more information, please contact
[email protected]. How Do Cartels Operate? Abstract This paper distills and organizes facts about cartels from about 20 European Commission decisions over 2000–2004. It describes the properties of a collusive outcome in terms of the setting of price and a market allocation, monitoring of agreements with respect to price but more importantly sales, punishment methods for enforcing an agreement and also the use of buy-backs to compensate cartel members, methods for responding to external disruptions from non-cartel sup- pliers and handling over- zealous sales representatives, and operational procedures in terms of the frequency of meetings and the cartel’s organizational structure. Keywords cartels, microeconomics Disciplines Business | Economics | Public Affairs, Public Policy and Public Administration Comments At the time of publication, author Joseph E. Harrington, Jr. was affiliated with Johns Hopkins University.