131,742 research outputs found
Multi-Market Collusion with Demand Linkages and Antitrust Enforcement
This paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand-related markets. We show that cartel prosecution can have a knock-on effect: desisting a cartel in one market reduces profits and cartel stability and leads to the break-up of the cartel in the adjacent market. Cartel prosecution can also have a waterbed effect: desisting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets. We also consider policy implications of our analysis regarding an antitrust authority's investment decision in cartel enforcement.cartel formation, demand linkage, antitrust enforcement
A note on cartel stability and endogenous sequencing with tacit collusion.
We use the concept of cartel stability defined by d'Aspremont et al. (1983) to obtain that the sequence of play between the cartel and the fringe affects cartel stability in a quantity-competition setting where firms tacitly collude. We also prove that an endogenous sequence of play between a cartel and a fringe depends on the discount factor. If the discount factor is large enough, the cartel and the fringe simultaneously choose quantities since the stable cartel may contain more firms under simultaneous play than under cartel leadership. This is due to the fact that under simultaneous play cartel firms have incentives to participate in the cartel because otherwise no collusion is possible.Collusion; Cartel stability; Stackelberg leadership
Polish Antitrust Law in its Fight against Cartels - Awaiting a Breakthrough
This paper presents the basic elements of the Polish anti-cartel regime and suggests what potential changes would be likely to improve it. Considered here are: the legal framework of anti-cartel enforcement in Poland as well as the performance of the Polish antitrust authority in its fight against cartels. Special attention is devoted to the substantive provisions of the cartel prohibition, investigatory powers of the antitrust authority, including the leniency programme, and the arsenal of sanctions available in cartels cases. The paper will show that Poland has sound anti-cartel laws and an antitrust authority determined to enforce them effectively. Notwithstanding its generally positive conclusions, the paper will conclude with some suggestions de lege ferenda which are likely to improve the Polish anti-cartel regime making its fight against cartels more dynamic.cartels, cartel prohibition, investigatory powers, leniency programme, anti-cartel sanctions, anti-cartel enforcement
Polish Antitrust Law in its Fight against Cartels - Awaiting a Breakthrough
This paper presents the basic elements of the Polish anti-cartel regime and suggests what potential changes would be likely to improve it. Considered here are: the legal framework of anti-cartel enforcement in Poland as well as the performance of the Polish antitrust authority in its fight against cartels. Special attention is devoted to the substantive provisions of the cartel prohibition, investigatory powers of the antitrust authority, including the leniency programme, and the arsenal of sanctions available in cartels cases. The paper will show that Poland has sound anti-cartel laws and an antitrust authority determined to enforce them effectively. Notwithstanding its generally positive conclusions, the paper will conclude with some suggestions de lege ferenda which are likely to improve the Polish anti-cartel regime making its fight against cartels more dynamic.cartels, cartel prohibition, investigatory powers, leniency programme, anti-cartel sanctions, anti-cartel enforcement
Optimal Timing of Cartel Formation Under Uncertainty
Understanding how business cartels form and expand is foundational for developing sound deterrence strategies. Past work (i.e. Connor, 2005) has relied on net present value (NPV) methods to evaluate the streams of costs and benefits of forming or joining a cartel. While NPV adequately measure the expected value of future streams of benefits and costs, higher moments of the distribution are also important in understanding agent behavior. Thus, in the presence of uncertainty about future streams and litigation costs, NPV may miss important dimensions that shape the issue. The decision to form or join a cartel is, at least, partially irreversible, because it exposes the firm or its involved managers to litigation on all previous returns and even after the cartel is dissolved. In this study, we rely on the aforementioned irreversible and uncertain nature of cartel participation and returns to develop a real-options framework that examines the optimal decision rules regarding the timing of cartel formation. This leads to suggestions for improved policy tools for antitrust agencies. In our model, all firms outside of a cartel essentially hold the option to form or join a cartel at some point in the future. The option is exercised the day the cartel is formed and has no cash value before that. The payoffs that firms give up by not immediately forming a cartel are weighed against uncertain and partially irreversible forming decision nature. Under the assumption of stochastic market demand, we find a threshold level of demand beyond which the cartel is formed. This threshold is analytically calculated as a function of a number of parameters. We then illustrate the conditions that determine the optimal timing decision of cartel formation by conducting comparative dynamics analysis. The timing of cartel formation is analyzed in both domestic and international settings. The qualitative results are obtained by comparative dynamics analysis and the quantitative results by numerical analysis. The results obtained in this study will assist in the development and improvement of guidelines to deter the formation of cartels by antitrust agencies in both developed and developing nations. In the first scenario of domestic cartel formation, at the beginning of each period, firms will choose to compete when the sunk costs related to a cartel operation are too high, current period demand is too low, and/or the expected duration of collusion is too short. Obviously, the possibilities of cartel formation increase when sunk costs go down, demand increases, or relationships with firms improve the prospects for a longer cartel arrangement. The value of waiting increases with a) increased uncertainty of market demand, b) increase irreversibility, and c) increased number of firms and d) a higher discount rate. We study the effect of demand uncertainty on the expected social welfare of cartel formation. The simulation results suggest that the expected social welfare under uncertainty could be higher than that under certainty. In a second scenario, we study the formation of international cartels. The model considers two markets with demand uncertainty that is either correlated or uncorrelated. The demand shocks in each market are assumed to follow geometric Brownian motion. We calculate the threshold value of demand faced by the cartel and obtain the rules guiding a firm's decision to form an international cartel. The comparative dynamics results obtained in the previous domestic scenario still apply. The simulation results suggest that cartel formation is most likely to occur between firms that come from countries with highly correlated markets and similar expected demand growth.Cartel Joining Behavior, Real Options Theory, International Cartels, Industrial Organization, K21, L00, L12,
Private Monitoring and Communication in Cartels: Explaining Recent Collusive Practices
Motivated by recent cartel practices, a stable collusive agreement is characterized when firms' prices and quantities are private information. Conditions are derived whereby an equilibrium exists in which firms truthfully report their sales and then make transfers within the cartel based on these reports. The properties of this equilibrium fit well with the cartel agreements in a number of markets including citric acid, lysine, and vitamins. (JEL D43, D82, K21, L12, L61, L65)
The Deterrent Effects of National Anti-Cartel Laws: Evidence from the International Vitamins Cartel
This paper estimates the effect on international trade flows during the 1990s of the formation of the vitamins cartel. After this cartel began operating, exports from countries where the cartel conspirators' headquarters were located to those nations in Asia, Western Europe, and Latin America that did not have active cartel enforcement regimes tended to rise in value more than in those nations that had such regimes. As industry studies suggest that the demand for vitamins is price inelastic, this finding is supportive of the hypothesis that the vitamins cartel raised prices further in nations without active cartel enforcement regimes. These findings also have implications for the cost-benefit analyses of anti-cartel laws. In nine economies in Western Europe and Latin America, where recent estimates of government outlays on competition policy enforcement were found, these expenditures were compared to the additional overcharges on vitamins imports that would have resulted if each of these nations did not have an active cartel enforcement regime. In seven of the nine economies, the reduction in overcharges on this one international cartel alone exceeded a quarter of their government's spending on the entire competition policy enforcement regime. These findings have a direct bearing on the debate, currently taking place at the World Trade Organization, on the merits of multilateral disciplines that would require all WTO members to enact and enforce provisions against hard core cartels.
Cartel destabilization and leniency programs: Empirical evidence
Leniency programs as a tool for cartel detection and cartel destabilization, have been implemented since the early nineties. Theoretical work has shown that leniency programs can be effective in enhancing cartel detection and deterrence, but these effects are not straight-forward. It is even possible that there is an increase in the total number of cartels. Empirical evidence shows that the positive effect on cartel deterrence seems to dominate, but cannot provide definite evidence, as inference is derived only by detected cartels. This study uses a more direct measure of success, the intensity of competition at the industry level of OECD countries. An instrumental variable approach, reveals a positive effect on industries' competition intensity of leniency programs indicating effectiveness in cartel destabilization and effective deterrence. --Cartel,Antitrust,Leniency Program
A Cartel Analysis of the German Labor Institutions and Its Implications for Labor Market Reforms
This paper offers a cartel explanation for the stability of German collective bargaining institutions.We show that a dense net of legal safeguards has been yarned around the wage setting cartel. These measures make deviation by cartel insiders less attractive and simultaneously erect entry barriers for alternative unions. As we argue many recent labor policy measures, which make wages more flexible, serve to further stabilize the labor cartel, while truly pro-competitive proposals have not been implemented exactly because of their destabilizing effects.We propose policy measures that remove entry barriers and facilitate outside competition by alternative collective bargaining organizations.Labor market cartel, labor market institutions, collective bargaining
Comparing cartel behavior: A simulation analysis with the System of Cartel Markers (SCM)
This work simulates the behavior of a price, quota and regional cartel in terms of indicators such as price, capacity and rate of return. As a first step the specific behavior patterns of each cartel are indicated in a graphical analysis before a comparison to a competitive benchmark has been implemented. In a second step simulation data has been applied to the System of Cartel Markers (SCM) invented by Blanckenburg and Geist. The SCM uses empirical correlation and stationarity of indicators to provide empirical evidence for cartel behavior. For the simulated cartel data the SCM delivered consistent results which underline its functionality for simulation purposes. --
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