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tation of finding evidence of a cartel. Apparently the Dutch competition authority has developed structural methods and used them with some success, for example by managing to uncover collusion in the shrimp industry.

Obviously, caution is required while applying these methods as it might clearly occur that the indicators suggest the presence collusion, but in fact there is no cartel.

2.1.1.1  Market characteristics that facilitate collusion

Such characteristics include relatively stable demand for a low-tech homogenous product sold in large volumes by a relatively small group of more or less identical suppliers that frequently interact in a transparent market. Indeed, product homogeneity implies a less complex price structure to agree upon; small group of suppliers reduces the coordination problem; low demand elasticity determines higher profits from increasing the price above the competitive levels, and transparency facilitates policing of cartel members in case of deviation, hence increasing cartel sustainability.

However, we are now going to see in some detail some of the main indicators found in literature.

Number of firms

As anticipated, the less number of firms in the market, the higher incidence of collusion. Some of the reasons explaining this fact are that a large number of participants make cartel negotiations on price and quantity more difficult, deviations from the collusive agreement harder to monitor, share of the market assigned to each firm smaller, thus, deviations become more tempting and punishments less costly.

Entry barriers

With low entry barriers, high prices will not be sustainable as new competitors will be attracted and enter the market, hence exerting downward pressure on prices. For this reason, the absence of entry barrier decreases future gains from collusion, and , thus, reduce the cost of punishment, which in turn affect the sustainability of collusion.

Capacity constraints

Considering that the threat of production at full capacity is the best way to deter cartel deviation, the role played by capacity constraints on the feasibility of cartels is ambiguous. On the one side, a capacity constrained firm gain less from deviating the cartel agreement, because it couldn’t accommodate the extra demand this would generate (deviation-inhibiting effect). On the other side, limited capacity decrease firms' retaliatory power in case of deviations (punishment-reducing effect).

Demand stability

Demand instability hinders collusion because demand fluctuations jeopardize the sustainability of collusion. At the same, with entry barriers being sufficiently high, demand growth might facilitate collusion as future economic conditions are expected to be more favourable than present ones and this increases the opportunity cost of punishment, decreasing the firms' incentive to deviate.

Demand fluctuations and business cycle

When the market expansion is at a peak, deviating from cartel would be a convenient strategy as the potential cost of retaliation in minimum. The sam本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。