Cartels’ Birth and Death Dynamics: Empirical Evidence

37 Pages Posted: 8 Jul 2021 Last revised: 11 May 2022

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 Karlsson

Stockholm School of Economics

Date Written: May 24, 2021

Abstract

This paper examines how the legal framework and macroeconomic environment impact cartel births and deaths. To avoid the inherent sample selection bias of prosecuted cartel studies, we use a unique dataset covering the population of Swedish legal cartels registered between 1947 and 1993. We explore the gradual tightening of Swedish competition law to study cartel dynamics. We first consider a count model focusing on the observed cartels. We then apply a hidden Markov model, which considers that cartel activity may have been imperfectly observed, since the probability of observing cartels varied with the register’s efficiency.
We find that the various competition laws had an overall deterrent effect, but new industries became collusive after the law of 1982; both cartel births and deaths are counter-cyclical; and higher interest rates increase cartel births and decrease cartel deaths, but these relationships are shown to be non-linear. Finally, we show that the likelihood of cartel survival is around 85%.

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, Cartels’ 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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