How Cartels Really Work, Episode 1: What Makes Something a Cartel?

Two gas stations are using AI to price their gas. They both come out at $4.50. “That’s a cartel? Not always. Common costs, standard competitive interdependence, tacit collusion, and an agreement between the AI agents—or an old-fashioned agreement between the humans running the firms—could all result in the same price. In Episode 1 of How Cartels Really Work, EconWorks poses an apparently simple question: What is a cartel? We consider the difference between* parallel pricing, interdependence,* conspiracy of silence,* communications,* deal,* and direct price-fixing.Then we complicate the problem. What if humans tell their artificial intelligence systems to maximize profits but respect the antitrust laws and don't collude? What if the AIs still coordinate? Suppose they communicate? What if they find a way around to colluding?And if they conceal the evidence? In each case, the price you see may be exactly the same. The legal story underneath may be entirely different. The cartel is not the price. The question is how the competitors got there. Next in the series: Why price fixing is easier to explain than it is to prove.Read the full article and graphic analysis: https://blog.econworks.com/p/how-cartels-really-work-episode-1?r=562wriExplore more visual economics content: https://econworks.comYouTube: https://www.youtube.com/@EconWorks-d3eSubstack: https://blog.econworks.com This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit blog.econworks.com/subscribe