Assignment:
Please read the following articles and answer the questions below:
"Auto parts price-fixing probe rattles industry" by Eric Tucker. Associated Press, May 25, 2014.
"Cartels: Just one more fix", The Economist, March 29, 2014. (Both articles have some information about the recent cartels that have been uncovered in worldwide markets for various auto parts, but you are welcome (and encouraged) to look for additional articles on the internet if you feel like you need more information on these industries or the cartels themselves. Remember, of course, that if you borrow or paraphrase specific facts or opinions from any of these articles you should cite them and provide a reference to the article at the end of your answers.)
Note: In the markets discussed here parts manufacturers are the sellers and automobile manufacturers are the buyers. Individual car buyers do not actually participate in these markets, but they may be affected indirectly if collusion by parts manufacturers raises costs for automobile manufacturers which will likely force them to charge more for cars.
1. Identify the important "facilitating factors" or characteristics of the industry that may have made collusion easier or more likely in auto parts markets, and briefly explain why each these characteristics might facilitate collusion in this setting. Please identify as many potential factors as you can and give careful explanations for why they are relevant in these auto parts markets and why they might make collusion easier (or harder) to sustain. Where appropriate, try to utilize the related economic concepts and terminology we have discussed in class.
2. Over the last few decades there has been a steady increase in the number of cartels that have been discovered and successfully prosecuted. What important changes have led to increased detection and also to more successful prosecution?