The Social Organization of Conspiracy: Illegal Networks in the Heavy Electrical Equipment Industry

Abstract

We analyze the social organization of three well-known price-fixing conspiracies in the heavy electrical equipment industry. Although aspects of collusion have been studied by industrial organization economists and organizational criminologists, the organization of conspiracies has remained virtually unexplored Using archival data, we reconstruct the actual communication networks involved in conspiracies in switchgear, transformers, and turbines. We find that the structure of illegal networks is driven primarily by the need to maximize concealment, rather than the need to maximize efficiency. However network structure is also contingent on information-processing requirements imposed by product and market characteristics. Our individual-level model predicts verdict (guilt or innocence), sentence, and fine as functions of personal centrality in the illegal network, network structure, management level, and company size.