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Xenia Matschke - One of the best experts on this subject based on the ideXlab platform.
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on the impact of import quotas on a quantity fixing Cartel in a two country setting
Jahrbucher Fur Nationalokonomie Und Statistik, 1999Co-Authors: Xenia MatschkeAbstract:In a static supergame context, a model is presented in which a foreign and a domestic firm form a Cartel for selling a homogeneous good. In order to maximize joint Cartel profit, the two firms have agreed to restrict sales to their own home market. Due to transfer costs, this market split paretodominates other Cartel solutions. Side payments are assumed to be feasible. The introduction of an import quota may affect Cartel stability as measured by a so-called critical interest rate. The two-country setting and the feasibility of side payments lead to results very different from previous findings that mild import regulations foster Cartelization whereas severe restrictions destabilize quantity-setting Cartels.
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on the impact of import quotas on a quantity fixing Cartel in a two country setting der einflus von importquoten auf die stabilitat eines mengenkartells eine analyse im rahmen eines zwei lander modells
Journal of Economics and Statistics, 1999Co-Authors: Xenia MatschkeAbstract:In a static supergame context, a model is presented in which a foreign and a domestic firm form a Cartel for selling a homogeneous good. In order to maximize joint Cartel profit, the two firms have agreed to restrict sales to their own home market. Due to transfer costs, this market split paretodominates other Cartel solutions. Side payments are assumed to be feasible. The introduction of an import quota may affect Cartel stability as measured by a so-called critical interest rate. The two-country setting and the feasibility of side payments lead to results very different from previous findings that mild import regulations foster Cartelization whereas severe restrictions destabilize quantity-setting Cartels.
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On the Impact of Import Quotas on a Quantity-Fixing Cartel in a Two-Country-Setting / Der Einfluß von Importquoten auf die Stabilität eines Mengenkartells – Eine Analyse im Rahmen eines Zwei-Länder-Modells
Journal of Economics and Statistics, 1999Co-Authors: Xenia MatschkeAbstract:In a static supergame context, a model is presented in which a foreign and a domestic firm form a Cartel for selling a homogeneous good. In order to maximize joint Cartel profit, the two firms have agreed to restrict sales to their own home market. Due to transfer costs, this market split paretodominates other Cartel solutions. Side payments are assumed to be feasible. The introduction of an import quota may affect Cartel stability as measured by a so-called critical interest rate. The two-country setting and the feasibility of side payments lead to results very different from previous findings that mild import regulations foster Cartelization whereas severe restrictions destabilize quantity-setting Cartels.
Kai Hüschelrath - One of the best experts on this subject based on the ideXlab platform.
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rent sharing to control non Cartel supply in the german cement market
Journal of Economics and Management Strategy, 2018Co-Authors: Joseph E. Harrington, Kai Hüschelrath, Ulrich LaitenbergerAbstract:A challenge for many Cartels is avoiding a destabilizing increase in non-Cartel supply in response to having raised price. In the case of the German cement Cartel that operated over 1991-2002, the primary source of non-Cartel supply was imports from Eastern European cement manufacturers. Industry sources have claimed that the Cartel sought to control imports by sharing rents with intermediaries in order to discourage them from sourcing foreign supply. Specifically, Cartel members would allow an intermediary to issue the invoice for a transaction and charge a fee even though the output went directly from the Cartel member's plant to the customer. We investigate this claim by first developing a theory of collusive pricing that takes account of the option of bribing intermediaries. The theory predicts that the cement Cartel members are more likely to share rents with an intermediary when the nearest Eastern European plant is closer and there is more Eastern European capacity outside of the control of the Cartel. Estimating a logit model that predicts when a Cartel member sells through an intermediary, the empirical analysis supports both predictions.
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When do firms leave Cartels? Determinants and the impact on Cartel survival
International Review of Law and Economics, 2018Co-Authors: Michael Hellwig, Kai HüschelrathAbstract:We use a dataset of 615 firms which participated in 114 illegal Cartels – convicted by the European Commission between 1999 and 2016 – to investigate the determinants of the duration of a firm’s participation in a Cartel. Applying a Weibull proportional hazard model with a particular focus on the impact of internal and external time-varying determinants, we find that firms show an increased probability to leave a Cartel if prior exits occurred as well as in periods of high demand growth. However, we find a reduced exit probability in situations of prior entries to the Cartel or in periods of high interest rates. Additional estimations on the Cartel level further suggest that firm exits increase the probability of a Cartel breakdown substantially.
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Cartel Cases and the Cartel Enforcement Process in the European Union 2001–2015
The Antitrust Bulletin, 2017Co-Authors: Michael Hellwig, Kai HüschelrathAbstract:We provide a comprehensive quantitative assessment of Cartels and the related Cartel enforcement process in the European Union (EU) from 2001 to 2015. In a first step, we present a detailed characterization of all Cartel cases decided by the European Commission (EC) with respect to various criteria such as the number of involved firm groups, Cartel market shares and market share asymmetries, involved industries, affected countries, types of infringement, types of Cartel breakdown, as well as Cartel duration. In a second step, we complement this Cartel-based analysis with a quantitative assessment of the public Cartel enforcement process in the EU, subdivided further into its duration, types of Cartel detection, the leniency program, the settlement procedure, overall fines imposed, and the conclusive appeals process with the General Court (GC) and the European Court of Justice (ECJ).
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Cartel cases and the Cartel enforcement process in the European Union 2001 - 2015 : a quantitative assessment
SSRN Electronic Journal, 2016Co-Authors: Michael Hellwig, Kai HüschelrathAbstract:We provide a comprehensive quantitative assessment of Cartels and the related Cartel enforcement process in the European Union (EU) from 2001 to 2015. In a first step, we present a detailed characterization of all Cartel cases decided by the European Commission (EC) with respect to various criteria such as the number of involved firm groups, Cartel market shares and market share asymmetries, involved industries, affected countries, types of infringement, types of Cartel breakdown as well as Cartel duration. In a second step, we complement this Cartel-based analysis with a quantitative assessment of the public Cartel enforcement process in the European Union - subdivided further into its duration, types of Cartel detection, the leniency program, the settlement procedure, overall fines imposed, and the conclusive appeals process with the General Court (GC) and the European Court of Justice (ECJ).
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Cartel Stability and Cartel Breakdown: Insights from the German Cement Industry
2016Co-Authors: Joseph E. Harrington, Kai Hüschelrath, Ulrich Laitenberger, Florian SmudaAbstract:The survival of a Cartel is continuously jeopardized by several sources of instability. Although there is plenty of evidence showing the creativity and audacity of Cartels to control such sources of instability, numerous cases of Cartel breakdowns suggest that these strategies to maintain supracompetitive prices sometimes result in failure. In this article, we complement a characterization of important industry developments during and after the German cement Cartel from 1991 to 2002 with theoretical and empirical evidence on two particular sources of Cartel instability: first, an external threat in the form of (substantially cheaper) cement imports from selected Eastern European countries. Second, an internal threat in the form of a significant expansion of production capacity by one Cartel member in combination with an unexpected downturn in the demand for cement. In particular, we provide well-founded explanations on how the Cartel managed to overcome the external threat to Cartel stability in the mid-1990s, however, eventually failed to solve the internal stability problem that occurred in the early 2000s.
John M Connor - One of the best experts on this subject based on the ideXlab platform.
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Cartel overcharges the author is professor emeritus at purdue university west lafayette in he is indebted to professor robert h lande who worked with the author on earlier law review articles on Cartel overcharges he also was responsible for locating
Research in Law and Economics, 2014Co-Authors: John M ConnorAbstract:Abstract Many jurisdictions fine illegal Cartels using penalty guidelines that presume an arbitrary 10% overcharge. This article surveys more than 700 published economic studies and judicial decisions that contain 2,041 quantitative estimates of overcharges of hard-core Cartels. The primary findings are: (1) the median average long-run overcharge for all types of Cartels over all time periods is 23.0%; (2) the mean average is at least 49%; (3) overcharges reached their zenith in 1891–1945 and have trended downward ever since; (4) 6% of the Cartel episodes are zero; (5) median overcharges of international-membership Cartels are 38% higher than those of domestic Cartels; (6) convicted Cartels are on average 19% more effective at raising prices as unpunished Cartels; (7) bid-rigging conduct displays 25% lower markups than price-fixing Cartels; (8) contemporary Cartels targeted by class actions have higher overcharges; and (9) when Cartels operate at peak effectiveness, price changes are 60–80% higher than the whole episode. Historical penalty guidelines aimed at optimally deterring Cartels are likely to be too low.
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The Determinants of Cartel Duration
SSRN Electronic Journal, 2013Co-Authors: Rosa M. Abrantes-metz, John M Connor, Albert D. MetzAbstract:In this paper we model Cartel duration as a mixed proportional hazard model and condition on Cartel characteristics such as the agency first detecting the Cartel, industry, if it is a bid rigging or price fixing Cartel, the number of countries affected, the affected sales, and measures of the economic cycle and trend. Results are intuitive and fairly consistent across models, and conform well with theory and prior empirical work. We also found that the model results are sensitive to the presence of unobserved heterogeneity.Among other results, we find that Cartels first detected by United States or European Union agencies tend to be longer-lived, likely because those detected by other jurisdictions are primarily follow-ups of related larger and older Cartels first uncovered in the United States or Europe. Bid rigging Cartels tend to be longer-lived than others, while Cartels distributed across geographies tend to be shorter-lived. Cartel durations are increasing in the size of a Cartel’s affected sales and sanctions. Industries such as Petroleum & Coal, Finance & Insurance, and Food, Feed, Tobacco & Transportation have shorter-lived Cartels, while industries such as Electronic Products have longer-lived Cartels. The state of the economy can impact the duration of a Cartel as well. Cartels where the leading firm has a market share of at least 40% have longer durations. However, the wide variation in the unobserved frailty factor suggests that additional, significant covariates remain unaccounted for in our information set.
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Cartels & Antitrust Portrayed: Private International Cartels from 1990 to 2008
SSRN Electronic Journal, 2009Co-Authors: John M ConnorAbstract:• The purpose of the following charts is to illustrate the size and economic impacts of the modern international Cartel movement and the enforcement responses of the world’s antitrust authoritiesand national courts. These illustrations may serve heuristic purposes or show empirical regularities that suggest hypotheses worthy of testing in future research.• The data employed encompass 516 private hard‐core Cartels that were subject to government or private legal actions (i.e., formal investigations, damages suits, fines, or consent decrees) betweenJanuary 1990 and December 2008. Each Cartel had participants with headquarters in two or more nations.• All monetary data are expressed in nominal U.S. dollars using exchange rates during the Cartel’s life or on the day a legal action was announced.• A special effort is made to create charts that illustrate trends in Cartel dimensions and antitrust decisions.
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Latin America Cartel Control
SSRN Electronic Journal, 2008Co-Authors: John M ConnorAbstract:International Cartelists today face antitrust investigations and possible fines from a score of national and supranational antitrust authorities. This paper provides quantitative information about the size and impacts of international Cartel activity in Latin America and uses a sample of modern private Cartels to evaluate the relative effectiveness of the four most active Latin American antitrust authorities: Argentina, Brazil, Chile, and Mexico. The sample consists of legal and economic information on 433international Cartels discovered in Latin America and the rest of the world during 1990-2007.The need for assertive anti-Cartel enforcement in Latin America is demonstrated by the large affected commerce and economic injuries of known international Cartels. Affected sales of the 16 Latin American-region Cartels exceeded US$20 billion. In addition, at least 84 large global Cartels also fixed prices in Latin America, but only four of them were investigated. Affected sales in Latin America from discovered Cartels both types totals $150 to $200 billion. The overcharges Latin American consumers were at least $35 billion in 1990-2007. More than 4000 companies (56 headquartered in Latin America) have been convicted of international price-fixing violations, of which more than 200 are recidivists.While more than US$48 billion in penalties has been imposed world-wide, it is doubtful that such monetary sanctions can deter modern international Cartels. The three with the most consistent legal responses to global Cartels are the United States, Canada, and the EU, which accounted for 95% of worldwide penalties. Yet, optimal Cartel deterrence is frustrated by the failure of compensatory private suits to take hold outside of North America and the low fines in Asian and Latin American jurisdictions. Of the three selected jurisdictions, the Brazilian antitrust authority has the best record of anti-Cartel enforcement in Latin America, but even CADE's surcharges are recouping less than 10% of the prosecuted Cartels' damages. Without significant increases in Cartel detection, in the levels of expected fines or civil penalties, or expansion of the standing of buyers to seek compensation, international price fixing will remain rational business conduct.
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Cartel Sanctions: An Empirical Analysis
SSRN Electronic Journal, 2008Co-Authors: Yuliya Bolotova, John M ConnorAbstract:Using a sample of modern international Cartels, we analyze the level and determinants of Cartel sanctions imposed on the participants of these Cartels in a number of antitrust jurisdictions. There is empirical evidence suggesting that gains from collusive conduct outweigh its costs represented by Cartel sanctions. While the average (median) overcharge characterizing the analyzed sample is 27.8% (27.0%) of affected sales, the average (median) Cartel fine is 10.2% (2.1%) of the volume of affected commerce. When compensations recovered by private parties are taken into account, the average Cartel sanction is 18.9% (4.9%) of affected sales. Furthermore, we find a negative statistically significant relationship between the level of Cartel sanctions and the overcharge level and we find a positive statistically significant relationship between the level of Cartel sanctions and the volume of affected sales. This may suggest that currently Cartel sanctions tend to be based on the volume of affected sales rather than on the overcharge level (i.e. damage).
Joseph E. Harrington - One of the best experts on this subject based on the ideXlab platform.
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rent sharing to control non Cartel supply in the german cement market
Journal of Economics and Management Strategy, 2018Co-Authors: Joseph E. Harrington, Kai Hüschelrath, Ulrich LaitenbergerAbstract:A challenge for many Cartels is avoiding a destabilizing increase in non-Cartel supply in response to having raised price. In the case of the German cement Cartel that operated over 1991-2002, the primary source of non-Cartel supply was imports from Eastern European cement manufacturers. Industry sources have claimed that the Cartel sought to control imports by sharing rents with intermediaries in order to discourage them from sourcing foreign supply. Specifically, Cartel members would allow an intermediary to issue the invoice for a transaction and charge a fee even though the output went directly from the Cartel member's plant to the customer. We investigate this claim by first developing a theory of collusive pricing that takes account of the option of bribing intermediaries. The theory predicts that the cement Cartel members are more likely to share rents with an intermediary when the nearest Eastern European plant is closer and there is more Eastern European capacity outside of the control of the Cartel. Estimating a logit model that predicts when a Cartel member sells through an intermediary, the empirical analysis supports both predictions.
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What Can the Duration of Discovered Cartels Tell Us About the Duration of All Cartels
The Economic Journal, 2017Co-Authors: Joseph E. Harrington, Yanhao 'max' WeiAbstract:There are many data sets based on the population of discovered Cartels and it is from this data that average Cartel duration and the annual probability of Cartel death are estimated. It is recognized, however, that these estimates could be biased because the population of discovered Cartels may not be a representative sample of the population of Cartels. This paper constructs a simple birth-death-discovery process to theoretically investigate what it is we can learn about Cartels from data on discovered Cartels.
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Cartel Stability and Cartel Breakdown: Insights from the German Cement Industry
2016Co-Authors: Joseph E. Harrington, Kai Hüschelrath, Ulrich Laitenberger, Florian SmudaAbstract:The survival of a Cartel is continuously jeopardized by several sources of instability. Although there is plenty of evidence showing the creativity and audacity of Cartels to control such sources of instability, numerous cases of Cartel breakdowns suggest that these strategies to maintain supracompetitive prices sometimes result in failure. In this article, we complement a characterization of important industry developments during and after the German cement Cartel from 1991 to 2002 with theoretical and empirical evidence on two particular sources of Cartel instability: first, an external threat in the form of (substantially cheaper) cement imports from selected Eastern European countries. Second, an internal threat in the form of a significant expansion of production capacity by one Cartel member in combination with an unexpected downturn in the demand for cement. In particular, we provide well-founded explanations on how the Cartel managed to overcome the external threat to Cartel stability in the mid-1990s, however, eventually failed to solve the internal stability problem that occurred in the early 2000s.
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Competition policy and Cartel size
International Economic Review, 2015Co-Authors: Iwan Bos, Joseph E. HarringtonAbstract:This article examines endogenous Cartel formation in the presence of a competition authority. Competition policy is shown to make the most inclusive stable Cartels less inclusive. In particular, small firms that might have been Cartel members in the absence of a competition authority are no longer members. Regarding the least inclusive stable Cartels, competition policy can either decrease or increase their size and, in the latter case, the collusive price can rise.
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Competition policy and Cartel size
research memorandum, 2013Co-Authors: A.m. Bos, Joseph E. HarringtonAbstract:This paper examines endogenous Cartel formation in the presence of a competition authority. Competition policy makes the most inclusive stable Cartels less inclusive. In particular, small firms that might have been Cartel members in the absence of a competition authority are no longer members. Regarding the least inclusive stable Cartels, competition policy can either increase or decrease their inclusiveness. Highly inelastic market demand is sufficient for the presence of a competition authority to cause the least inclusive stable Cartels to increase in size.
Antonio Tesoriere - One of the best experts on this subject based on the ideXlab platform.
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competing r d joint ventures in cournot oligopoly with spillovers
Journal of Economics, 2015Co-Authors: Antonio TesoriereAbstract:This paper considers competition between R&D Cartels, whereby prospective Cournot competitors coordinate their R&D decisions in order to maximize joint profit. It studies how R&D activity, aggregate profit, consumer surplus, and social welfare vary as the number of competing Cartels varies. It also compares equilibrium with second best R&D, and discusses the policy implications of the results. The results show that the effects of R&D Cartel competition depend on the welfare criterion adopted and on whether there are cooperative synergies or not.