Friday, July 30, 2010

About Cartel Overcharges: Kroes is Correct

Posted by D. Daniel Sokol

John M. Connor, Purdue University - Applied Econ suggests that About Cartel Overcharges: Kroes is Correct.

ABSTRACT: An article by Ehmer and Rosati (ER) in expresses dissatisfaction with a view expressed in a speech by Commissioner Neelie Kroes. As a justification for the high cartel fines imposed on cartels during her administration, she contends that most economic research indicates that the average cartel overcharge is likely to be 20% to 25%. This article defends Kroes’ assertion about the typicality of such overcharges. I argue in some detail that ER have it wrong. The overwhelming empirical evidence on cartel overcharges is reliable, scientific, and biased downward.

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