Why Does Price Fixing Persists? The Role of Fairness

Abstract

The assumption that consumer welfare and efficiency is the sole concern of antitrust law conflicts with what people view as unfair about antitrust law. The present article advances the understanding of antitrust law by providing some theoretical considerations and empirical results of people's tendency to judge price-fixing as unfair when they feel that firms obtain a benefit at the expense of consumers. This is due to the fact that buyers perceive transaction terms as rights; and, sellers have a right to profit according to the reference frame of the initial transaction. People's attitudes towards price-fixing were obtained through experimental surveys on Amazon Mechanical Turk in the United States. The empirical results suggest that the dual entitlement theory captures a tendency of people to judge price fixing based on the rule of fairness. The main implication is that antitrust authorities should not take for granted that people view price-fixing as something harmful and should emphasize people's moral intuitions of price-fixing as a limitation for actual compliance antitrust programs. The suggestion is for antitrust authorities to focus corporate compliance programs on people's intuitions of price-fixing as a way to improve compliance in the prevention of cartel agreements.