Trust and antitrust

Previous studies on the stability of cartel agreements concentrated on industry and product related stability determinants. Homogeneity of goods and the presence of large customers were among the factors leading to a lower frequency of cartel break downs. This project advocates the complementary view that the decision to deviate from the cartel contract is not only associated with economic costs and benefits, but also with also with psychologic costs incurred by the responsible managers. We
test the hypothesis that trust between managers creating and organizing a cartel co-determines the stability of this organization. We use a data set of international cartels prosecuted by the European Commission between 1996 and 2004.