Chile's three biggest pharmacy chains ended a price war by using a supplier to verify collusion.

Big pharmacy chains were stuck in an aggressive price warprice warA cycle of repeated price cuts by competitors trying not to lose customers., cutting prices on popular items to lure shoppers. Researchers wanted to know how these rivals managed to stop fighting and form an illegal cartel to raise prices together. Using court-record daily prices and an economic model, the researchers tracked what happened. First, a court banned comparative ads. This sharply cut the profits chains made from deeply discounted items, weakening their desire to fight. Next, the chains used an upstream supplier as a middleman to test a follow-the-leader pricing scheme. Once proven, they used it to restore their profit margins and then pushed prices even higher to extract extra profits, though those later increases spread more slowly.

Why it matters

Cartels raise prices for ordinary shoppers. This case shows how a price war can end and coordination begin, and how a supplier can be used to make sure no one cheats. Understanding that mechanism helps regulators spot the same pattern elsewhere.

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