Boom in Cartel Activity Is Focus of Cover Story in Johns Hopkins Business Research Magazine

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Johns Hopkins researchers find that while the number of reported cases of cartel activity has skyrocketed, prosecutors still face a tough task in trying to prove collusion.

The spring 2016 issue of Changing Business, the twice-yearly magazine showcasing faculty research at the Johns Hopkins Carey Business School, is now available online and in print.

The cover story, “The Price Isn’t Right,” examines Professor Valerie Suslow’s finding that while the number of reported cases of cartel activity has skyrocketed, prosecutors still face a tough task in trying to prove collusion.

Suslow, who also serves as the vice dean of faculty and research at the Carey Business School, studies the ways in which companies avoid competition rather than focusing on innovation to outpace their counterparts. Her research examines the causes, tactics, and repercussions of such corporate collusion.

Her latest paper on price fixing examines data from United States prosecutions of price-fixing cases from 1961 to 2013. It concludes that cartels are likelier to break up when firms are impatient, more intent on current than future profits. Written with Professor Margaret Levenstein of the University of Michigan, the study is to be published in an upcoming special issue of the Review of Industrial Organization.

In 2013, as the paper shows, 50 new criminal cases were filed in the U.S., and over $1 billion in fines were levied. The abundance of cases notwithstanding, Suslow says, proving collusion is no easy task for the government. Firms can legally choose to compete more or less intensely; for example, it’s legal to follow a competitor’s price lead, as long as there isn’t an explicit agreement to do so. Still, companies must be careful, as the United States Federal Trade Commission in recent years has stepped up its activities against “invitations to collude.”

Other featured research in the new Changing Business:

  •     “It’s Worth a Shot.” A system of buybacks and rebates could be the cure for the supply-chain hitch that routinely hampers flu vaccine delivery. Research by Assistant Professor Tinglong Dai.
  •     “A Boost in Well-Being.” The psychological health of disadvantaged adolescents improved after their families began receiving annual infusions of extra income. Research by Assistant Professor Emilia Simeonova.
  •     “At Your Service.” Materialists who link possessions to happiness regard brands that have human attributes as “servants” over which they can assert power. Research by Associate Professor Christian “Hyeongmin” Kim.
  •     “Pointing the Way to Healthy Choices.” In-store promotion of low-fat, low-sodium foods can help increase their sales among customers in poor communities. Research by Professor and Vice Dean for Education Kevin Frick.
  •     “Should I Stay Or Should I Go?” How you view yourself can determine whether you generally try to be someone who attains or just maintains. Research by Assistant Professor Haiyang Yang.

Dean Bernard T. Ferrari of the Carey Business School writes in a message at the front of the magazine: “In 2016, Johns Hopkins marks the 140th anniversary of its founding as the first research university in the United States. Indeed, few American institutions of higher learning can claim such a long record of innovations that have benefitted so many people around the world. This great tradition of knowledge creation continues at JHU, and the Carey Business School is proud to contribute to the university’s focus on research.”

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Timothy Parsons

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