Anatomy of Cartel Contracts
University of Jyväskylä - School of Business and Economics
Norwegian School of Economics (NHH) - Department of Economics
KU Leuven - Faculty of Business and Economics (FBE); CEPR
CEPR Discussion Paper No. DP9362
We study cartel contracts using data on 18 contract clauses of 109 legal Finnish manufacturing cartels. One third of the clauses relate to raising profits; the others deal with instability through incentive compatibility, cartel organization, or external threats. Cartels use three main approaches to raise profits: Price, market allocation, and specialization. These appear to be substitutes. Choosing one has implications on how cartels deal with instability. Simplifying, we find that large cartels agree on prices, cartels in homogenous goods industries allocate markets, and small cartels avoid competition through specialization.
Number of Pages in PDF File: 57
Keywords: antitrust, cartels, competition policy, contracts, industry heterogeneity
JEL Classification: K12, L40, L41
Date posted: February 26, 2013
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