“On the Sociology of Cartels”

In the majority of cartel research firms are regarded as collective entities and the formation and breakdown of cartels are typically explained by firms’ incentives and corresponding market conditions. While this approach has provided lots of valuable insights, it disregards one crucial aspect: In reality, cartels are not formed by firms, but by people who need to trust each other in order to overcome the inherent risks of participating in anti-competitive agreements. In our recent research “On the Sociology of Cartels” we address this topic by analysing 15 German cartels regarding the characteristics of individual members, their communication methods, the internal organisation and the eventual breakup. This research is complemented by an experimental paper that studies cooperation with negative externalities, as it is usually the case in cartels, focusing on the role of gender, information and various psychological traits. Our results indicate that homogeneity of participants plays a central role for cooperation and cartel formation which has practical implications for competition policy and policies aimed at diversity.