Margaret Levenstein and Valerie Suslow seek out what determines a business cartel’s success. They reject the assumption of many economists that the main reason cartels fail comes from cheating firms, which undermine attempts by cartels to collude to raise prices and restrict output. They believe that cheating is just one facet of how a cartel can fail and not the main reason. To answer their question, Levenstein and Suslow attempt to answer four other research questions: 1. Can cartels succeed? 2. How long do cartels last? 3. What impact do cartels have? 4. What causes a cartel to break up or fail? Using a variety of quantitative evidence, Levenstein and Suslow use these questions to determine what aids in a cartels success. They contend that
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Collaboration, rather than individual gain, is the best strategy to survive long term. To survive long term. Stigler argued that patient and well informed cartels can deter cheating and allow collaboration in order to survive. Stigler argued that cheating was the dominant challenge that cartels faced and previous research focused on punishment strategies that allow firms to overcome the temptation to cheat. Levenstein and Suslow agreed that collaboration is a better alternative to cheating, they counter Stigler on the dominant challenge to cartels, arguing that cartels face other challenges that are more immediate than cheating (Levenstein and Suslow, 2006, pgs. …show more content…
The median duration of cartels is between five to six years, with the shortest duration lasting less than a year and the longest lasting decades. However, Suslow and Levenstein cannot distinguish why cartels last so long or so short as they do. They conjecture that many cartels may have cheated which led to their downfall, but other cartels could have cheated and had gotten away with it. Cartel longevity proved to be the most effective way to measure success because for cartels to last as long as they could, profit margins must have been sufficient to keep them lucrative. However, Levenstein and Suslow also show that there are fewer cartels the longer their years of operation. How do they survive for so long? In two ways, one by overcoming the problems of coordination, cheating, and entry. Secondly, some cartels are in industries that make collaboration easier than others (Levenstein and Suslow, 2006, pgs.
Collaboration, rather than individual gain, is the best strategy to survive long term. To survive long term. Stigler argued that patient and well informed cartels can deter cheating and allow collaboration in order to survive. Stigler argued that cheating was the dominant challenge that cartels faced and previous research focused on punishment strategies that allow firms to overcome the temptation to cheat. Levenstein and Suslow agreed that collaboration is a better alternative to cheating, they counter Stigler on the dominant challenge to cartels, arguing that cartels face other challenges that are more immediate than cheating (Levenstein and Suslow, 2006, pgs. …show more content…
The median duration of cartels is between five to six years, with the shortest duration lasting less than a year and the longest lasting decades. However, Suslow and Levenstein cannot distinguish why cartels last so long or so short as they do. They conjecture that many cartels may have cheated which led to their downfall, but other cartels could have cheated and had gotten away with it. Cartel longevity proved to be the most effective way to measure success because for cartels to last as long as they could, profit margins must have been sufficient to keep them lucrative. However, Levenstein and Suslow also show that there are fewer cartels the longer their years of operation. How do they survive for so long? In two ways, one by overcoming the problems of coordination, cheating, and entry. Secondly, some cartels are in industries that make collaboration easier than others (Levenstein and Suslow, 2006, pgs.