Quantifying the Deterrent Effect of Anti-Cartel Enforcement

Abstract

It is widely believed that deterrence constitutes the most important impact of competition policy, but this seems to be largely a matter faith rather than based on any empirical evidence. This paper present a rare attempt to quantify the deterrence effect of cartel policy. It develops a conceptual framework which establishes the sort of information necessary for such quantification, and then calibrates by drawing upon existing cartel literature and using evidence from legal cartels to approximate the counterfactual - the population distribution which would be observed absent cartel law. Even on conservative assumptions this suggests that at least half, probably much more, of all potential cartel harm is deterred.

Keywords: anti-competitive harm, cartels, detection, deterrence, Monte Carlo simulation, selection bias

JEL Classification: H11, K21, L44