Intermittent collusive agreements: antitrust policy and business cycles

In this article we study collusive strategies when firms face random demand fluctuations. This work analyzes the optimal level of fines in times of crisis. We assume that detection probability may or may not depend on collusive price. When cartel is detectable irrespective of price they are less stable in booms than in recessions and prices can be counter-cyclical. This requires to set the highest achievable fines. By contrast if detection probability depends on collusive prices intermittent collusive strategy can be implemented in which firms collude on periods for which it is the most profitable strategy. Firms can either charge procyclical or countercyclical collusive prices. Optimal level of fines depends on demand state and it can be discounted if demand is low to support marginal deterrence e¤ect or during booms to decrease the harmfulness of anticompetitive conduct