Predicting Cartel Formation

63 Pages Posted: 2 Mar 2016 Last revised: 20 Jul 2016

See all articles by Daniel Herold

Daniel Herold

University of Giessen

Johannes Paha

Dept. of Economics (VWL I)

Date Written: July 19, 2016

Abstract

This article distills insights about cartel formation from 41 cases prosecuted by the European Commission between 2001 and 2010. The case studies examine the events occurring in the industries prior to the cartels' set-up and identify the following potential causes for cartel formation: Changes in prices, demand and customer conduct, capacity utilization, increased imports and entry by competitors, and events in the legal and regulatory environment of the firms. Cartel formation is not necessarily triggered by events negatively impacting the firms' profitability, however, profit shocks and the resulting (expected) disturbance in the market seem to trigger collusive behavior. Factors that are commonly deemed to destabilize cartels, like entry of new competitors or buyer power, may foster cartel formation.

Keywords: Cartel Formation, Collusion

JEL Classification: K21, L41, L60

Suggested Citation

Herold, Daniel and Paha, Johannes, Predicting Cartel Formation (July 19, 2016). Available at SSRN: https://ssrn.com/abstract=2740528 or http://dx.doi.org/10.2139/ssrn.2740528

Daniel Herold (Contact Author)

University of Giessen ( email )

Betriebswirtschaftslehre VII
Giessen, WY 35394
Germany

Johannes Paha

Dept. of Economics (VWL I) ( email )

Licher Strasse 62
Giessen, 35394
Germany

HOME PAGE: http://https://www.uni-giessen.de/fbz/fb02/fb/professuren/vwl/goetz/kontakt/mitarbeiter/pahaordner

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