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Managing Cartels: how Cartel Participants Create Stability in the Absence of law

Managing Cartels: how Cartel Participants Create Stability in the Absence of law Firms enter cartels (e.g. price-fixing; bid-rigging) in order to control market uncertainties and gain collusive profits, but face challenges in controlling the cartel itself. A challenge for business cartels is how to organise collective illegal activities without the use of formal control, such as binding legal contracts or arbitration. While one might expect that a lack of formal legal control leads to mutual conflicts and opportunistic behaviour resulting in short-lived cartels, firms often manage to continue their illegal conduct for years. This raises questions as to how firms organise their cartels in the absence of legal means. This article addresses how informal coordinating mechanisms enable cartel stability outside the scope of formal legal control. Based on an in depth study of 14 Dutch cartels, this article shows the importance of informal social mechanisms to coordinate, monitor, enforce, and compensate for the longevity of business cartels. Furthermore, the results emphasise that in order to explain cartel stability, social mechanisms that induce trust need to be considered. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png European Journal on Criminal Policy and Research Springer Journals

Managing Cartels: how Cartel Participants Create Stability in the Absence of law

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References (70)

Publisher
Springer Journals
Copyright
Copyright © 2016 by The Author(s)
Subject
Criminology and Criminal Justice; Criminology and Criminal Justice, general; Political Science
ISSN
0928-1371
eISSN
1572-9869
DOI
10.1007/s10610-016-9329-7
Publisher site
See Article on Publisher Site

Abstract

Firms enter cartels (e.g. price-fixing; bid-rigging) in order to control market uncertainties and gain collusive profits, but face challenges in controlling the cartel itself. A challenge for business cartels is how to organise collective illegal activities without the use of formal control, such as binding legal contracts or arbitration. While one might expect that a lack of formal legal control leads to mutual conflicts and opportunistic behaviour resulting in short-lived cartels, firms often manage to continue their illegal conduct for years. This raises questions as to how firms organise their cartels in the absence of legal means. This article addresses how informal coordinating mechanisms enable cartel stability outside the scope of formal legal control. Based on an in depth study of 14 Dutch cartels, this article shows the importance of informal social mechanisms to coordinate, monitor, enforce, and compensate for the longevity of business cartels. Furthermore, the results emphasise that in order to explain cartel stability, social mechanisms that induce trust need to be considered.

Journal

European Journal on Criminal Policy and Research – Springer Journals

Published: Sep 16, 2016

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