Abstract: This study examines how antitrust regulation affects both the deterrence and the formation of collusion, conditional on the market's strategic interaction structure. We consider a 2X2 prisoner's dilemma matrix and derive the conditions under which cooperative collusion (C,C) and alternating collusion, characterized by alternating (D,C) and (C,D) outcomes, can be sustained. Building on this theoretical framework, we design a laboratory experiment and obtain three main results. First, cartel formation is more frequent under strategic complements than under strategic substitutes, although the introduction of regulation reduces collusion. Second, some firms respond to regulation by shifting from cooperative to alternating collusion in order to evade enforcement. Third, under strategic substitutes, accumulated experience with cartel detection reduces collusion, whereas under strategic complements it reinforces cooperative collusion. These findings suggest that even when regulation deters explicit cartels, firms may adjust their collusive strategies toward forms that are less exposed to enforcement, so overall collusion does not necessarily decline. Moreover, in markets with strong strategic complementarities, regulation may reinforce collusion.

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