“SOMEBODY ALWAYS CHEATS”

“SOMEBODY ALWAYS CHEATS” When Meyer Burstein taught about price fixing or cartels, he pointed out that he had been a participant in a price fixing cartel before becoming an economist. The problem, he said cheerfully, was in keeping the cartel together—there was a great incentive to cut the price just a little below the agreed-on price, either directly or by offering better credit terms or a delivery advantage: “Somebody always cheats.” Some 25 years later, when I was involved in antitrust law, the prevalent view among American antitrust enforcers was that it was so difficult to “administer” a cartel that cartels would only develop in markets where there was a very small number of firms. Otherwise there would soon be cheaters who would destroy the cartel. Now, an enormous conspiracy to fix LIBOR has demonstrated that you can have a long-running conspiracy to fix prices with a large number of people involved.