Wednesday, July 13, 2011
Posted by D. Daniel Sokol
Peter L. Ormosi, Norwich Business School, University of East Anglia (UEA) - Centre for Competition Policy asks How Big is a Tip of the Iceberg? A Parsimonious Way to Estimate Cartel Detection Rate.
ABSTRACT: Reliable estimates of the probability of cartel detection could help regulators design more appropriate sanctions for cartelising behaviour, and improve our understanding of the efficiency of cartel enforcement and its potential deterrent effects. In comparison to previous works, this paper offers a more parsimonious and simple-to-use method to estimate time-dependent cartel detection and survival rates, whilst allowing heterogeneity across firms and markets. It draws on capture-recapture methods, similar to those used in ecology to make inferences on various population characteristics by looking at the number of recurring individuals in successive samples with replacement. Given the simplicity and minimal data needs of this method, it could be developed to provide an important tool for cartel-related policy analysis, something that could also lead to promising new research on the deterrent effect of cartel enforcement.