Evaluating Leniency and Modeling Cartel Durations: Time-Varying Policy Impacts and Sample Selection

Posted by D. Daniel Sokol

Jun Zhou, Bonn University, Wirtschaftspolitische Abteilung, Tilburg Law and Economics Center (TILEC) is Evaluating Leniency and Modeling Cartel Durations: Time-Varying Policy Impacts and Sample Selection.

ABSTRACT: The objective of this paper is to investigate the efficacy of the European Commission's leniency in destabilizing and deterring cartels. I discuss a dynamic model of cartel formation and dissolution to illustrate how changes in antitrust policies and market and macroeconomic conditions might affect cartel duration. Comparative statics results are then corroborated with empirical estimates of a hazard function adjusted to account for both the heterogeneity of cartels and the non-proportional time dependence suggested by theory. Statistical tests are consistent with the theoretic predictions that following a more efficacious leniency program, the average duration of discovered cartels rises in the short run and falls in the long-run.