Cartels Uncovered

56 Pages Posted: 22 Jun 2011  

Ari Hyytinen

University of Jyväskylä - School of Business and Economics

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)

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Date Written: March 11, 2011

Abstract

How many cartels are there? The answer is important in assessing the need for 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. We take the model to data from a period of legal cartels - Finnish manufacturing industries 1951-1990. Our estimates suggest that once born, cartels are persistent; by the end of the period, almost all industries were cartellized. Our model may be extended to identify key policy parameters from data generated under different competition policy regimes.

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

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

Suggested Citation

Hyytinen, Ari and Steen, Frode and Toivanen, Otto, Cartels Uncovered (March 11, 2011). Available at SSRN: https://ssrn.com/abstract=1868810 or http://dx.doi.org/10.2139/ssrn.1868810

Ari Hyytinen (Contact Author)

University of Jyväskylä - School of Business and Economics ( email )

University of Jyväskylä
PO Box 35
FIN 40351, FIN-40014
Finland

Frode Steen

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway
+47 55 959 259 (Phone)
+47 55 959 543 (Fax)

Otto Toivanen

Aalto University - Department of Economics ( email )

PO Box 1210
FI-00101 Helsinki
Finland

KU Leuven - Faculty of Business and Economics (FBE) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

CEPR ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Helsinki Center of Economic Research (HECER)

FI-00014 Helsinki
Finland

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