Measuring the Incentive to Collude: The Vitamin Cartels, 1990-1999

79 Pages Posted: 27 Dec 2016 Last revised: 28 May 2019

See all articles by Mitsuru Igami

Mitsuru Igami

Yale University - Department of Economics ; Yale University - Cowles Foundation

Takuo Sugaya

Stanford Graduate School of Business

Date Written: May 21, 2019

Abstract

Do mergers help or hinder collusion? This paper studies the stability of the vitamin cartels in the 1990s and presents a repeated-games approach to quantify "coordinated effects" of a merger. We use data and direct evidence from American courts and European agencies to show the incentive compatibility constraint (ICC) of the short-lived vitamin C cartel was likely to be violated when it actually collapsed in 1995, whereas the ICCs of the long-lived cartels (vitamins A and E, and beta carotene) were satisfied until the prosecution in 1999. Simulations suggest some mergers could have prolonged the vitamin C cartel, but others could have further destabilized it, because both the direction and magnitude of "coordinated effects" depend not only on the number of firms but also on their cost asymmetry.

Keywords: Antitrust, Cartel, Collusion, Coordinated effect, Merger, Repeated game

JEL Classification: D43, L13, L41

Suggested Citation

Igami, Mitsuru and Sugaya, Takuo, Measuring the Incentive to Collude: The Vitamin Cartels, 1990-1999 (May 21, 2019). Available at SSRN: https://ssrn.com/abstract=2889837 or http://dx.doi.org/10.2139/ssrn.2889837

Mitsuru Igami (Contact Author)

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Takuo Sugaya

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
1,060
Abstract Views
3,254
rank
19,688
PlumX Metrics