Trade Associations and Collusion among Many Agents: Evidence from Physicians

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Joint with: Juan Pablo Atal

We study a recent collusion case among physicians in Chile. Most gynecologists in one city formed a trade association to bargain for better rates with insurance companies. After unsuccessful negotiations, the physicians jointly terminated their insurer contracts and set a minimum price. We find that subsequent realized prices coincided with Nash-Bertrand prices, and that the minimum price was barely binding. We show that these actions ensured the association’s stability and increased profits. Our findings show how a trade association may help sustain collusion among a large number of heterogeneous agents.

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