What Happens When Attempted Collusion Fails

Cite this Article
Thomas A. Lambert, What Happens When Attempted Collusion Fails, Truth on the Market (December 11, 2007), https://truthonthemarket.com/2007/12/11/what-happens-when-attempted-collusion-fails/

Harvard College decided this year not to offer a service option many of its customers want — early admission. When Harvard’s new policy was announced, the dean of admissions took care to emphasize, “We’re looking for all the company we can get.” Soon thereafter, Harvard got some company; Princeton adopted a similar policy, and a number of other elite Northeastern schools began planning to cut early admission.

I thought this looked fishy. (See here and here.) There was a consciously parallel service cut-back that would not seem to make sense if accomplished unilaterally. (Indeed, officials from a number of the schools admitted that unilateral action wouldn’t make sense.) That looks like an “agreement” under cases like Interstate Circuit. And if it’s an agreement, then it’s an agreement not to compete in providing a service demanded by customers. Smells like anticompetitive collusion.

Collusion, though, is tough to implement. If there are other suppliers of the good or service besides those who are parties to the agreement, they can respond to consumer demand, thereby usurping business from the colluders. Perhaps that’s what’s happening with college admissions. Since Harvard and Princeton announced their policies, applications are up 45% at the University of Chicago. Wow.

It’ll be interesting to see how Harvard and Princeton respond. If they stick to their policies of no early admissions, then we can infer that they’re truly trying to better their institutions by setting up optimal admissions procedures. If they go back to their early admissions ways, we might chalk this up to a failed attempt at collusion. Anyone wanna place bets?