Cartel Stability: An Empirical Analysis
56 Pages Posted: 22 Oct 2006
Date Written: October 2006
Using the data on 238 cartelized markets we evaluate econometrically the impact of cartel characteristics as well the market and legal environment of cartel operation on cartel stability. The latter is measured as the expected number of repeated attempts to form a cartel in the same product market. We analyze the behavior of guilty (sanctioned) cartels relative to legal cartels. We find that global cartels are less stable than local cartels. Cartels operating in the countries with developed antitrust law are more stable than cartels operating in the countries without similar regulation. As antitrust law regimes become stricter, sanctioned cartels become less stable. If the average duration of cartel episode is relatively short, the cartel is more likely to make another attempt to collude. If a cartel manages to impose a relatively high level of overcharge, the cartel is less likely to repeat collusive conduct.
Keywords: antitrust, cartels, collusion, Poisson model, recidivism
JEL Classification: L1, L2, L4, L6, L7, L8, L9
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