Governing Cartels as Common Pool Resources

Usually, economic research on collusion looks at the firms and how they optimally behave. The complex situation in which involved agents of the firms find themselves tends to be overly simplified or overlooked. This exploratory paper looks through the lens of the `governance of the commons' to study the internal organization of cartels. It highlights the high entanglement of the agents' norms, habits, and individual incentives within collusive agreements and suggests a novel interpretation of a cartel's excess profit as a common pool resource. Last, it uses a simple theoretical toy model to demonstrate how complex governance decisions may become for the involved agents once one loosens the modeling restrictions on their behavior. I suggest the `Institutional Analysis and Development' (IAD) framework to better understand the governance of collusive agreements. By doing this, the paper sheds new light on the economic analysis of collusion and provides many starting points for future research at the intersection of institutional economics, public choice, and industrial organization