How Much Do Cartels Overcharge?
AbstractThe estimation of cartel overcharges lies at the heart of antitrust policy on cartel prosecution as it constitutes a key element in the determination of fines. Connor and Lande (2008) conducted a survey of cartels and found a mean overcharge estimate in the range of 31% to 49%. By examining more sources, Connor (2010) finds a mean of 50.4% for successful cartels. However, the data used in those studies are estimates obtained from different methodologies, sources and contexts rather than by direct observations. Therefore, these data are subject to model error, estimation error and publication bias. A quick examination of the Connor database reveals that the universe of overcharge estimate is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimate are potentially biased, fitting a linear regression model to the data without providing a carefull treatment of the problems raised above may produce distorted results. We conduct a meta-analysis of cartel overcharge estimate in the spirit of Connor and Bolotova (2006) while providing a sound treatment of these matters. We find a bias-corrected mean and median overcharge estimate of 15.76% and 16.43%. Clearly, our results have significant antitrust policy implications.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 14-462.
Date of creation: 31 Jan 2014
Date of revision:
Antitrust; Cartel overcharges; Heckman; Meta-analysis;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-21 (All new papers)
- NEP-COM-2014-02-21 (Industrial Competition)
- NEP-IND-2014-02-21 (Industrial Organization)
- NEP-LAW-2014-02-21 (Law & Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Marie-Laure Allain & Marcel Boyer & Rachidi Kotchoni & Jean-Pierre Ponssard, 2011.
"The Determination of Optimal Fines in Cartel Cases The Myth of Underdeterrence,"
- Marie-Laure Allain & Marcel Boyer & Rachidi Kotchoni & Jean-Pierre Ponssard, 2011. "The Determination of Optimal Fines in Cartel Cases - The Myth of Underdeterrence," CIRANO Working Papers 2011s-34, CIRANO.
- Marcel Boyer & Rachidi Kotchoni, 2011.
"The Econometrics of Cartel Overcharges,"
CIRANO Working Papers
- Lawrence White, 2001.
"Lysine and Price Fixing: How Long? How Severe?,"
Review of Industrial Organization,
Springer, vol. 18(1), pages 23-31, February.
- Gary S. Becker, 1968.
"Crime and Punishment: An Economic Approach,"
Journal of Political Economy,
University of Chicago Press, vol. 76, pages 169.
- Catherine J. Morrison, 1990. "Market Power, Economic Profitability and Productivity Growth Measurement: An Integrated Structural Approach," NBER Working Papers 3355, National Bureau of Economic Research, Inc.
- Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February.
- James F. Nieberding, 2006. "Estimating overcharges in antitrust cases using a reduced-form approach: Methods and issues," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 361-380, November.
- Werden, G.J. & Koyak, R.A. & Froeb, L.M., 1993.
"What Is the Effect of Bid-Rigging on Prices,"
93-2, U.S. Department of Justice - Antitrust Division.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.