Cartel Birth and Death Dynamics: Empirical Evidence

43 Pages Posted: 8 Jul 2021 Last revised: 14 Feb 2023

See all articles by Catarina M. P. Marvão

Catarina M. P. Marvão

Technological University Dublin; Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE)

Chloe Le Coq

SITE-Stockholm School of Economics

Tove Forsbacka

Stockholm School of Economics

Date Written: May 24, 2021

Abstract

This paper examines how a gradual tightening of antitrust enforcement impacts cartels’ births and deaths. To avoid the inherent sample selection bias in prosecuted cartel studies, we use a unique dataset of Swedish legal cartels registered between 1946 and 1993. We compare estimates from a count model (considering only registered cartels) and a Hidden Markov Model (allowing for potentially unregistered cartels) to identify observed and hidden cartel dynamics. The count model suggests that strengthening antitrust enforcement has a deterrent effect, but the Hidden Markov Model suggests otherwise. Despite stricter competition laws and a credible threat of cartel prohibition, cartels continue to form, but do so undercover. Additionally, our results suggest that the strengthening of competition law has little impact on destabilizing existing cartels.

Keywords: Cartels, Legal contracts, Competition policy, Antitrust

JEL Classification: C14, C41, K21, K42, L41

Suggested Citation

Marvão, Catarina Moura Pinto and Le Coq, Chloe and Forsbacka Karlsson, Tove, Cartel Birth and Death Dynamics: Empirical Evidence (May 24, 2021). Available at SSRN: https://ssrn.com/abstract=3873351 or http://dx.doi.org/10.2139/ssrn.3873351

Catarina Moura Pinto Marvão (Contact Author)

Technological University Dublin ( email )

Dublin
Ireland

Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE) ( email )

P.O. Box 6501
S-113 83 Stockholm, 11383
Sweden

Chloe Le Coq

SITE-Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

HOME PAGE: http://www.hhs.se/SITE/Staff/Pages/ChloeLeCoq.aspxl

Tove Forsbacka Karlsson

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

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