1. ©2016 John M. Abowd and Jennifer P. Wissink, all rights reserved.
The End Lecture 28
Dr. Jennifer P. Wissink
©2016 John M. Abowd and Jennifer P. Wissink, all rights reserved.
May 11, 2016

2. Chamberlin: So, Does Conscious Parallelism Happen?
With only a couple/few identical firms, and homogeneous output, this might be expected.
However, when firms have different cost structures…
w/o collusion suppose you get the Cournot-Nash Joint Profit
w/o collusion suppose you get the Cournot-Nash Joint Profit
w/ collusion you get/want “Collusive Monopoly” Joint Profit
w/ collusion you get/want “Collusive Monopoly” Joint Profit

3. Sample Problem Solving: Assume: N=2 and QD=6-1/2P  PD=12-2Q, where Q=q1+q2 Assume: tc1=tc2=0  mc1=mc2=0

4. So What Oligopoly Model Is The One?
Depends on the particular industry.
Requires lots of investigation and appeals to empirical information.
Does profit look to be positive?
Does price appear to be greater than marginal cost?
Different markets require using different models of oligopoly behavior.

5. IO-Summary: Can You Fill This Table In?

6. How About Explicit Collusion
How About Explicit Collusion? When Duopolists Mimic a Multi-Plant Monopoly
mcIran
marginal costcartel
mcSA

7. How About Explicit Collusion
How About Explicit Collusion? When Duopolists Mimic a Multi-Plant Monopoly
mcIran
marginal costcartel
mcSA
Demandcartel
marginal revenuecartel
Volatility Returns to Oil Market After OPEC Deal Fails

8. Collusion Story With a Cornell Connection #1
The Archer Daniels Midland (ADM) investigation has been characterized by the Department of Justice, Antitrust Division, as one of the largest criminal antitrust cases in United States history. Since August 1996, at least seven cases were filed (back then) against eight companies and ten individuals charging price fixing and allocating sales volumes of lysine and/or citric acid worldwide.
Lysine, a $600 million a year industry (back then), is used by farmers as a feed additive to ensure proper growth of poultry and swine. Citric acid, a $1.2 billion a year industry (back then), is a flavor additive and preservative produced from various sugars and is found in soft drinks, processed foods, detergents, and pharmaceutical and cosmetic products. Eight corporate defendants and six individual defendants pled guilty and were fined in excess of $190 million. Most of the defendants were from overseas.
In October 1996, ADM was sentenced to pay a $100 million fine for its participation in the lysine and citric acid conspiracies. At the time, it was the largest criminal fine ever imposed in an antitrust case. On September 17, 1998, three former ADM executives were convicted of participating in the lysine conspiracy following a nine-week trial . This trial was one of the Antitrust Division's highest profile and most successful criminal cases in its history.
Mark Whitacre was key. He was the guy who was the ADM informant and even served jail time, for this and other crimes….
Cornell connection: he earned a Ph.D. in Nutritional Biochemistry from Cornell University (1983).
There is a book (among others) entitled The Informant by Kurt Eichenwald that chronicles what happened. It was turned into a movie, The Informant, a dark comedy thriller film, starring Matt Damon.

9. Collusion Story With a Cornell Connection #2
Quoting… The Justice Department last week (back then) sued the eight Ivy League colleges and MIT, plus "various other. . .co-conspirators," for allegedly violating the Sherman Antitrust Act "by illegally conspiring to restrain price competition on financial aid" to prospective undergraduate students. …The Ivy League colleges signed a consent decree that settles the suit against them. MIT declined to sign. …aides refused to say how the suit would affect the rest of the reported group of 57 colleges which have been under investigation since In the decree, the Ivy League defendants--Brown, Columbia, Cornell, Dartmouth, Harvard, Princeton, the University of Pennsylvania and Yale--agree that they will no longer collude or conspire on financial aid. They also agreed not to discuss or agree on future tuition or faculty salary increases.
MIT BALKS, Ivies Settle Antitrust Suit on Aid, By Kenneth D. Campbell
From TechTalk, Published by the MIT News Office at the Massachusetts Institute of Technology, Cambridge, Mass. May 29, 1991
MIT Agrees to Settle Antitrust Suit, U.S. Says
December 23, 1993,
i>clicker question: Do you buy the MIT argument that price fixing was good for the students and their families?
YES!
Nope.

10. The End - Amen Study hard. Use the class web pages – stay informed.
Work loads of problems.
Eat well.
Take a walk once in a while.
Get some sleep.
Don’t survive on
And last but not least....
Thanks to YOU ALL for a great semester!!
And thanks to the TAs for all their hard work.
Best of luck on all your finals. I’m looking for good things from you all in our final!!