Partial Cartels and Ringleaders: An Experimental Study

This paper investigates partial cartels, which laboratory studies have neglected despite their empirical prevalence. We conduct two laboratory experiments to understand how they function compared to all-inclusive cartels and respond to antitrust policies. First, we compare partial cartel formation with all-inclusive settings typically studied experimentally. Second, we test how ringleader discrimination policies perform within partial cartel environments. Our first study reveals that partial cartels create opposing effects: while individual willingness to communicate decreases due to free-riding incentives, communication occurs more frequently overall and prices are higher when sufficient firms participate. We find that all-inclusive cartels prove essential for achieving high prices. Our second study discovers that ringleader discrimination policies can backfire by facilitating cartel formation through leading-by-example effects. These findings highlight distinct coordination mechanisms of partial cartels and demonstrate the need for careful antitrust policy design.