Document Type

Article

Publication Date

Summer 2002

Abstract

Many instances of anticompetitive collusion are designed not to affect prices and output directly, but rather to shape the rules under which competition takes place. They help to cushion competitors from hard competition through such "rules" as restraints on advertising, sham ethical codes, or bans on discounts, coupons, "free" services, or extended hours of operation. Instead of collusion directly over outcomes, firms attuned to the strategic impact of their activities often agree on ways in which to shape their environments in order to soften competition and to insulate themselves from hard competition in ways that will lead to higher prices. While not every agreement among rivals is anticompetitive, every agreement that is anticompetitive falls within one of three categories. Type I collusion encompasses traditional agreements to affect price and/or output directly or fairly directly. Type II collusion consists of agreements to disadvantage rivals. And Type III "rule fixing" collusion gathers together and explains the remaining types of agreements.

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