On optimal cartel deterrence policies

This paper studies audit policies designed to deter explicit cartels in the most effective way. We first compare a standard random and stationary audit strategy with a simple deterministic but non stationary strategy; we show that the certainty of an ulterior control may better deter collusion than the recurrent threat of a sword of Damocles that would lead on average to same frequency of audit.We then explore more complex non stationary strategies and show that it is theoretically possible to deter collusion in the whole economy, even with a small audit budget.