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Modeling the Birth and Death of Cartels with an Application to Evaluating Competition Policy

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  • Joseph E. Harrington
  • Myong-Hun Chang

Abstract

One of the primary challenges to measuring the impact of antitrust or competition policy on collusion is that the cartel population is unobservable; we observe only the population of discovered cartels. To address this challenge, a model of cartel creation and dissolution is developed to endogenously derive the populations of cartels and discovered cartels. With this theory, one can infer the impact of competition policy on the population of cartels by measuring its impact on the population of discovered cartels. In particular, changes in the duration of discovered cartels can be informative in assessing whether a new policy is reducing the latent rate of cartels. (JEL: L13, L41) (c) 2009 by the European Economic Association.

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Bibliographic Info

Article provided by MIT Press in its journal Journal of the European Economic Association.

Volume (Year): 7 (2009)
Issue (Month): 6 (December)
Pages: 1400-1435

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Handle: RePEc:tpr:jeurec:v:7:y:2009:i:6:p:1400-1435

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Cited by:
  1. Acconcia, Antonio & Immordino, Giovanni & Piccolo, Salvatore & Rey, Patrick, 2013. "Accomplice-Witness and Organized Crime: Theory and Evidence from Italy," CEPR Discussion Papers 9543, C.E.P.R. Discussion Papers.
  2. Roberta Dessì & Salvatore Piccolo, 2008. "Two is Company, N is a Crowd? Merchant Guilds and Social Capital," CSEF Working Papers 202, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 12 Jul 2009.
  3. Clemens, Georg & Rau, Holger A., 2014. "Do leniency policies facilitate collusion? Experimental evidence," DICE Discussion Papers 130, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  4. Zhou, J., 2012. "Endogenous Lysine Strategy Profile and Cartel Duration: An Instrumental Variables Approach," Discussion Paper 2012-009, Tilburg University, Tilburg Law and Economic Center.
  5. Joseph E. Harrington, Jr., 2009. "When Does a Self-Serving Antitrust Authority Act in Society's Best Interests?," Economics Working Paper Archive 549, The Johns Hopkins University,Department of Economics.
  6. Zhou, Jun, 2011. "A Note on “Modeling the Birth and Death of Cartels with An Application to Evaluating Competition Policy†by Harrington and Chang (2009)," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 362, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  7. Gärtner, Dennis L. & Zhou, Jun, 2012. "Delays in Leniency Application: Is There Really a Race to the Enforcer's Door?," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 395, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  8. Joseph E. Harrington, Jr., 2011. "Corporate Leniency with Private Information: The Push of Prosecution and the Pull of Pre-emption," Economics Working Paper Archive 573, The Johns Hopkins University,Department of Economics.
  9. Hyytinen, Ari & Steen, Frode & Toivanen, Otto, 2010. "Cartels Uncovered," CEPR Discussion Papers 7761, C.E.P.R. Discussion Papers.
  10. Myong-Hun Chang & Joseph E. Harrington, Jr., 2008. "The Impact of a Corporate Leniency Program on Antitrust Enforcement and Cartelization," Economics Working Paper Archive 548, The Johns Hopkins University,Department of Economics.
  11. Zhou, Jun, 2011. "Evaluating Leniency with Missing Information on Undetected Cartels: Exploring Time-Varying Policy Impacts on Cartel Duration," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 353, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.

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