List #1: Posner listing of conditions favorable to successful collusion. Note that while this is Posner's own list,it is not exhaustive, and can be supplemented. Also, it should be noted that some entries on this list are worthy of additional research to clarify their effects on collusion, and have in fact generated a

"mini-literature" of their own.

Use of this list: To target industries worthy of special antitrust concern, and avoid enforcing Sherman Act against "unsuccessful" collusion.

1. High market concentration on the selling side.

2. No fringe or small sellers.

3. Inelastic demand at competitive price.

4. Effective entry takes a relatively long time.

5. Many customers.

6. Standardized product.

7. The principal firms sell at the same level in the chain of distribution.

8. Price competition is more important than other forms of competition.

9. High ratio of fixed to variable costs.

10. Demand static or declining over time.

11. Sealed bidding.

12. History of previous collusive behavior.

List #2: Evidence (when viewed in the context of the entire behavioral record, and the conditions in list #1) relevant to demonstrating actual collusion even though no overt acts of collusion have been found.

Purpose of listing: To avoid enforcement of Sherman Act only in cases of overt collusion, i.e. to extend enforcement to possibly

important tacit collusion cases. Note that the primary policy debate is whether there is any effective remedy against "purely tacit, or purely interdependent" forms of oligopoly output restriction (e.g. a Cournot type result). One approach would be to identify "facilitating" devices than could be legally enjoined (i.e. forbidden), in the hope than collusion could not survive without those practices.

Collusion might be inferred when we see:

1. Fixed relative market shares among top firms over time.

2. Declining absolute market shares of industry leaders.

3. Persistent price discrimination.

4. Certain types of exchanges of price information.

5. Regional price variations.

6. Identical sealed bids.

7. Price, output, and capacity changes at the time of suspected initiation of collusion. Entry with excess capacity as one example.

8. Industry-wide resale price maintenance or non-price vertical restraints.

9. Relatively infrequent price changes; smaller price reactions as a result of known cost changes.

10. Demand elasticity at market price.

11. Level and pattern of profits relatively favorable to smaller firms.

12. Particular pricing and marketing strategies:

a. Basing point pricing (actually in Posner's list).

b. Most favored customer clauses (not in Posner's list).

c. Meeting competition clauses (not in Posner's list).

Finally, note that some items often cited by commentators are not in Posner's list (e.g. frequent and "non-lumpy" orders from buyers might be more explicitly added to List #1). Also, one can quibble about whether some items in List #2 might be in List #1 (e.g. MFC and MCC clauses, for example).