DETECTING PRICE FIXING BY TESTING FOR RANDOMNESS.

DETECTING PRICE FIXING BY TESTING FOR RANDOMNESS. The belief that price fixing could only occur when there were not many firms in the market is challenged whenever larger conspiracies are revealed. This article in the Economist (December 15, 2012) describes two new methods for finding possible price fixing which were not in use 25 years ago when I was involved in antitrust law. First, Benford’s law (wikipedia article here) says that the first digit in a number in “many (but not all) real life sources of data” is more likely to be a 1 (70% of the time) or a 2 (30% of the time). Numbers which have been manipulated to appear random won’t follow this rule. Second, prices which have been fixed by conspiracy will change less frequently than prices in a competitive market (which respond to cost and demand changes) It would be hard to reach agreement on frequent small price changes.