Price Fixing Overcharges: Revised 2nd Edition
114 Pages Posted: 19 May 2010
Date Written: April 27, 2010
This paper surveys almost 600 published economic studies and judicial decisions that contain 1,517 quantitative estimates of overcharges of hard-core cartels, of which 8% are zero. The primary finding is that the median long-run overcharge for all types of cartels over all time periods is 23.3%. The median overcharge for international cartels (30.0%) is significantly higher than for domestic cartels (17.2%). Cartel overcharges are negatively skewed, pushing the mean overcharge for all successful cartels to 50.4%. Convicted cartels are on average slightly more effective at raising prices as unpunished cartels, whereas bid-rigging conduct displays lower mark-ups than price-fixing cartels. Because some jurisdictions fine illegal cartels on the presumption of a 10% overcharge, these averages suggest that penalty guidelines aimed at optimally deterring cartels ought to be increased.
Keywords: cartel, price fixing, overcharge, antitrust, optimal deterrence
JEL Classification: L12, L42, K22, B14, F29
Suggested Citation: Suggested Citation