Factors Influencing the Magnitude of Cartel Overcharges: An Empirical Analysis of the US Market

Abstract:     
Using the overcharge estimates for 333 cartel episodes, we evaluate the impact of cartel characteristics and changes in the market and legal environment on the magnitude of overcharges imposed by private cartels in the US and other geographic markets as early as the 18th century. The median overcharge attained by cartels represented in our sample is 18 percent of selling price. International cartels imposed higher overcharges than domestic cartels. Longer cartel episodes generated higher overcharges. Overcharges achieved in the US and European markets were lower than overcharges imposed in the Asian markets and the rest of the world. Overcharges tended to decline as antitrust enforcement became stricter. Higher overcharges were associated with markets where cartels had high market shares and with markets characterized by high levels of fixed costs.

Keywords: Antitrust, Cartels, Collusion, Overcharges

JEL Classifications: L1, L4, L6

Working Paper Series