Measuring the Effectiveness of Anti-Cartel Interventions: A Conceptual Framework

45 Pages Posted: 12 Jan 2016

See all articles by Yannis Katsoulacos

Yannis Katsoulacos

Athens University of Economics and Business

Evgenia Motchenkova

VU University Amsterdam - Department of Economics; TILEC

David Ulph

University of St. Andrews - School of Economics and Finance

Date Written: January 2016

Abstract

This paper develops a model of the birth and death of cartels in the presence of enforcement activities by a Competition Authority (CA). We distinguish three sets of interventions: (a) detecting, prosecuting and penalising cartels; (b) actions that aim to stop cartel activity in the short-term, immediately following successful prosecution; (c) actions that aim to prevent the re-emergence of prosecuted cartels in the longer term. The last two intervention activities have not been analysed in the existing literature. In addition we take account of the structure and toughness of penalties. In this framework the enforcement activity of a CA causes industries in which cartels form to oscillate between periods of competitive pricing and periods of cartel pricing. We determine the impact of CA activity on deterred, impeded, and suffered harm. We derive measures of both the total and the marginal effects on welfare resulting from competition authority interventions and show how these break down into measures of the Direct Effect of interventions (i.e. the effect due to cartel activity being impeded) and two Indirect/Behavioural Effects – on Deterrence and Pricing. Finally, we calibrate the model and estimate the fraction of the harm that CAs remove as well as the magnitude of total and marginal welfare effects of anti-cartel interventions.

Keywords: Antitrust Enforcement, Antitrust Law, Cartel, Oligopoly, Repeated Games

JEL Classification: L4, K21, D43, C73

Suggested Citation

Katsoulacos, Yannis and Motchenkova, Evgenia and Ulph, David, Measuring the Effectiveness of Anti-Cartel Interventions: A Conceptual Framework (January 2016). TILEC Discussion Paper No. 2016-001, Available at SSRN: https://ssrn.com/abstract=2714238 or http://dx.doi.org/10.2139/ssrn.2714238

Yannis Katsoulacos

Athens University of Economics and Business ( email )

Evgenia Motchenkova (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

David Ulph

University of St. Andrews - School of Economics and Finance ( email )

University of St Andrews
St. Andrews, Scotland KY16 9AR
United Kingdom

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