Anatomy of Cartel Contracts

57 Pages Posted: 26 Feb 2013  

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: February 2013

Abstract

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.

Keywords: antitrust, cartels, competition policy, contracts, industry heterogeneity

JEL Classification: K12, L40, L41

Suggested Citation

Hyytinen, Ari and Steen, Frode and Toivanen, Otto, Anatomy of Cartel Contracts (February 2013). CEPR Discussion Paper No. DP9362. Available at SSRN: https://ssrn.com/abstract=2224287

Ari Hyytinen

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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