June 3, 2007
Cartel Overcharges: An Empirical Analysis
Posted by D. Daniel Sokol
A sometime collaborator and former student of John Connor, Yuliya Bolotova of the University of Idaho Agricultural Economics and Rural Sociology Department, has posted Cartel Overcharges: An Empirical Analysis, which builds upon Connor's vast and impressive work on cartels. A key finding is that the more effective antitrust regimes tend to have lower overcharges from cartels.
ABSTRACT: Using the overcharge estimates for 406 cartel episodes, I evaluate the impact of cartel characteristics and market environment on the size of the overcharges imposed by cartels in different geographic markets and during six antitrust law regimes starting from the 18th century. I find that the average overcharge imposed by cartels in the sample is 21.88 percent with a median of 20 percent. International cartels imposed higher overcharges than domestic cartels. Overcharges imposed in the US and European markets were lower than overcharges imposed in the Asian markets and the rest of the world. Overcharges tend to decline as antitrust enforcement regimes had become stricter. As predicted by cartel theory, market structure is an important factor influencing the overcharge level. Markets where cartels have a high market share tend to have higher overcharges. If a leading firm has a high market share, the overcharges tend to decrease. As the number of cartel participants increases, the overcharges tend to fall. As cartels grow older, they manage to manipulate the market price more effectively.
June 3, 2007 | Permalink
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