The Impact of Collusion on Price Behavior: Empirical Results from Two Recent Cases
38 Pages Posted: 11 Jun 2007
Date Written: October 2006
We use extended ARCH and GARCH models to examine the differences in the behavior of the first two moments of the price distribution during collusive and competitive phases of two recently discovered conspiracies, citric acid and lysine. According to our results, the conspirators managed to raise prices by 9 and 25 cents per pound in the short-run relative to non-collusive periods. Also, the variance of prices during the lysine conspiracy was lower and the variance of prices during the citric acid conspiracy was higher than during more competitive periods. The proposed methodology may be used for antitrust screening and prosecution purposes.
Keywords: cartels, citric acid, GARCH, lysine, overcharge, price, variance screen
JEL Classification: K21, L1, L2, L4, L6
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