Competitor Coupons: A Remedy for Residual Collusion.

The article addresses the phenomenon of residual collusion, where supracompetitive prices persist even after a cartel has been legally dismantled and firms cease explicit communication. It proposes a novel remedy involving "competitor coupons," which are coupons that cartel members must distribute to their past purchasers but can only be redeemed when buying from rival firms. This mechanism incentivizes firms to undercut collusive prices to avoid costly coupon payments, thereby destabilizing tacit collusion and promoting competition. The analysis demonstrates that competitor coupons reduce the stability of collusion under general market conditions, contrasting with conventional coupons that reinforce collusion. The paper also discusses practical considerations for implementing competitor coupons and suggests their broader applicability in addressing tacit collusion beyond cartel cases.