The Impact of Cartelization on Pricing Dynamics

38 Pages Posted: 18 Jan 2012

See all articles by Kai Hüschelrath

Kai Hüschelrath

ZEW – Leibniz Centre for European Economic Research

Tobias Veith

ZEW – Leibniz Centre for European Economic Research

Date Written: November 18, 2011

Abstract

Although the pricing dynamics of hardcore cartels have been studied intensively from a theoretical perspective, empirical evidence is still rare. We combine publicly available data with a unique private data set of about 340,000 market transactions from 36 smaller and larger customers of German cement producers to study the pricing dynamics during and after the breakdown of a German cement cartel. We find that, first, after the breakdown of the cartel cartel members reduce net prices to a far larger extent than gross prices and that, second, noncartel members slip under the price umbrella of the cartel to increase profits. Our results have important implications for both the design of screening tools to detect cartels as part of public enforcement and the calculation of damages as part of private enforcement of competition law.

Keywords: Antitrust policy, cartels, umbrella pricing, net prices, cement, screening, damages

JEL Classification: L41, L61, K21

Suggested Citation

Hüschelrath, Kai and Veith, Tobias, The Impact of Cartelization on Pricing Dynamics (November 18, 2011). ZEW - Centre for European Economic Research Discussion Paper No. 11-067, Available at SSRN: https://ssrn.com/abstract=1987604 or http://dx.doi.org/10.2139/ssrn.1987604

Kai Hüschelrath

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Tobias Veith (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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