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Cartels Uncovered

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  • Hyytinen, Ari
  • Steen, Frode
  • Toivanen, Otto

Abstract

How many cartels are there? The answer is important in assessing the efficiency of competition policy. We present a Hidden Markov Model that answers the question, taking into account that often we do not know whether a cartel exists in an industry or not. Our model identifies key policy parameters from data generated under different competition policy regimes and may be used with time-series or panel data. We take the model to data from a period of legal cartels - Finnish manufacturing industries 1951 - 1990. Our estimates suggest that by the end of the period, almost all industries were cartelized.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7761.

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Date of creation: Mar 2010
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Handle: RePEc:cpr:ceprdp:7761

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Keywords: antitrust; cartel; competition; detection; Hidden Markov models; illegal; legal; leniency; policy; registry;

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References

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  1. Lee, Lung-Fei & Porter, Robert H, 1984. "Switching Regression Models with Imperfect Sample Separation Information-With an Application on Cartel Stability," Econometrica, Econometric Society, vol. 52(2), pages 391-418, March.
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Cited by:
  1. Kjell Erik Lommerud & Frode Meland & Odd Rune Straume, 2008. "Mergers and capital flight in unionised oligopolies: Is there scope for a 'national champion' policy?," NIPE Working Papers 10/2008, NIPE - Universidade do Minho.

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