Cartels Uncovered

Hyytinen, Ari; Steen, Frode; Toivanen, Otto

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Cartels Uncovered

CEPR Discussion Paper No. DP7761

50 Pages Posted: 5 Apr 2010

See all articles by Ari Hyytinen

Frode Steen

Norwegian School of Economics (NHH) - Department of Economics

Otto Toivanen

Aalto University - Department of Economics; KU Leuven - Faculty of Business and Economics (FBE); CEPR; Helsinki Center of Economic Research (HECER)

There are 4 versions of this paper

Date Written: March 2010

Abstract

How many cartels are there? The answer is important in assessing the efficiency of competition policy. We present a Hidden Markov Model that answers the question, taking into account that often we do not know whether a cartel exists in an industry or not. Our model identifies key policy parameters from data generated under different competition policy regimes and may be used with time-series or panel data. We take the model to data from a period of legal cartels - Finnish manufacturing industries 1951-1990. Our estimates suggest that by the end of the period, almost all industries were cartelized.

Keywords: antitrust, cartel, competition, detection, Hidden Markov models, illegal, legal, leniency, policy, registry

JEL Classification: L0, L4, L40, L41, L60

Suggested Citation: Suggested Citation

Hyytinen, Ari and Steen, Frode and Toivanen, Otto, Cartels Uncovered (March 2010). CEPR Discussion Paper No. DP7761, Available at SSRN: https://ssrn.com/abstract=1583259