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The Econometrics of Cartel Overcharges

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  • Marcel Boyer

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  • Rachidi Kotchoni

Abstract

Connor and Lande (2006) conducted a survey of cartel overcharge estimates and found an average in the range of 31% to 49%. By examining more sources, Connor (2010b) finds a median of 23.3% for all type of cartels and a mean of 50.4% for successful cartels. However, the data used in these studies are estimates rather than true observations, since the true illegal profits of cartels are rarely observable. Therefore, these data are subject to model error, estimation error and publication bias. A quick glance at the Connor database reveals that the universe of overcharge estimates is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimates are potentially biased, fitting a linear OLS model to the data without providing a carefull treatment of the problems raised by the publication bias, outliers, asymmetry, and heterogeneity will necessarily produce distorted results. We conduct a meta-analysis of cartel overcharge estimates in the spirit of Connor and Bolotova (2006), but providing a sound treatment of the matters raised above. We find a mean bias-corrected overcharge estimate of 13.8% for all cartels, and of 13.6% for cartels with initial estimates lying between 0% and 50%. Connor et Lande (2006) survolent la littérature sur les majorations de prix imposées par les cartels et concluent à une augmentation moyenne variant entre 31 % et 49 %. Considérant un échantillon plus grand, Connor (2010b) trouve une médiane de 23,3 % pour tous les types de cartel et une moyenne de 50,4 % pour les cartels dont les majorations de prix estimées sont positives. Cependant, les échantillons utilisés dans ces études sont constitués d’estimations et non pas d’observations directes. De ce fait, ces échantillons héritent possiblement d’erreurs de modélisation et d’estimation, ainsi que d’un biais de publication. Une analyse sommaire des majorations dans l’échantillon de Connor révèle une distribution asymétrique, de l’hétérogénéité et la présence d’observations aberrantes. Ainsi, au-delà du fait que les estimations d’augmentation de prix par les cartels sont potentiellement biaisées, l’estimation d’un modèle par MCO avec de telles données sans un traitement adéquat de l’asymétrie, de l’hétérogénéité et des données aberrantes produirait des résultats déformés. Nous réalisons une nouvelle méta-analyse dans le même esprit que celui de Connor et Bolotova (2006), mais en proposant une prise en compte adéquate des problèmes mentionnés ci-dessus. Après correction du biais d’estimation, nos résultats suggèrent que la moyenne des majorations de prix estimées est de l’ordre de 13,8 % pour tous les types de cartels et de 13,6 % pour les cartels dont les estimations de majoration de prix se situaient initialement entre 0 % et 50 %.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2011s-35.

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Date of creation: 01 Mar 2011
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Handle: RePEc:cir:cirwor:2011s-35

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Keywords: Cartels; overcharges; Cartels; majoration de prix.;

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Cited by:
  1. Boyer, Marcel & Kotchoni, Rachidi, 2014. "How Much Do Cartels Overcharge?," TSE Working Papers 14-462, Toulouse School of Economics (TSE).

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