Faculty members at IIM Bangalore generate knowledge through cutting-edge research in all functional areas of management that would benefit public and private sector companies, and government and society in general. The knowledge generated by IIMB faculty appears in leading academic journals with high citation index and impact factor. Many textbooks and working papers are written on a regular basis. Research carried out by IIMB is used to augment new courses and executive education programmes.
Journal Name: The Journal of Law and Economics November 2016
Journal Title: Hit Where it Hurts: Cartel Policing Using Targeted Sales Embargos
Abstract
In this paper, we examine a punishment strategy employed by a large cartel to police its members. The cartel punishes its defectors in a key product or regional market where it hurts them the most, not necessarily in the market where the defection has occurred. Cartels can leverage this targeted punishment strategy to induce good behavior across multiple, distant markets. We find evidence consistent with these ideas in examining several episodes of punishment imposed by the association of traders in India on select pharmaceutical firms. Such punishments result in private costs for defecting firms and social costs for consumers in India. Our results support the theoretical view that growing buyer power in conjunction with vertical restraints facilitates collusion.
