Friday, November 30, 2018

Trucks, Triangles and a Quiet Life: Welfare Implications of the European Trucks Cartel

Christian Beyer (Ostwestfalen-Lippe University of Applied Sciences); Elke Kottmann (Ostwestfalen-Lippe University of Applied Sciences); Korbinian von Blanckenburg (Ostwestfalen-Lippe University of Applied Sciences) discuss Trucks, Triangles and a Quiet Life: Welfare Implications of the European Trucks Cartel.

ABSTRACT: We present a pragmatic approach to calculating the total economic loss induced by a cartel, focusing on the European trucks cartel (1997-2011). Overall, we estimate a net welfare loss of approximately €0.7 bn. and an overcharge below 1% (€1.8 bn.). The cartel overcharge is surprisingly low. We explain this by (1) the existence of a reference market with an already elevated price level and (2) by other industry-specific factors that encourage cartel arrangements. In the case of the trucks cartel, the companies involved have apparently preferred the Hicksian "quiet life" of the monopolist to a further maximization of profits.

https://lawprofessors.typepad.com/antitrustprof_blog/2018/11/trucks-triangles-and-a-quiet-life-welfare-implications-of-the-european-trucks-cartel.html

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