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Cartel detection in procurement markets

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  • Hüschelrath, Kai
  • Veith, Tobias

Abstract

Cartel detection is usually viewed as a key task of either competition authorities or compliance officials in firms with an elevated risk of cartelization. We argue that customers of hard core cartels can have both incentives and possibilities to detect such agreements on their own initiative through the use of market-specific data sets. We apply a unique data set of about 340,000 market transactions from 36 smaller and larger customers of German cement producers and show that a price screen would have allowed particularly larger customers to detect the upstream cement cartel before the competition authority. The results not only suggest that monitoring procurement markets through screening tools has the potential of substantial cost reductions - thereby improving the competitive position of the respective user firms - but also allow the conclusion that competition authorities should view customers of potentially cartelized industries as important allies in their endeavour to fight hard core cartels. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 11-066.

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Date of creation: 2011
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Handle: RePEc:zbw:zewdip:11066

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Keywords: business economics; procurement; antitrust policy; cartels; detection; screening;

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References

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  1. Patrick Bajari & Lixin Ye, 2001. "Deciding Between Competition and Collusion," Working Papers, Stanford University, Department of Economics 01008, Stanford University, Department of Economics.
  2. Christian Lorenz, 2008. "Screening markets for cartel detection: collusive markers in the CFD cartel-audit," European Journal of Law and Economics, Springer, Springer, vol. 26(2), pages 213-232, October.
  3. Lars-Hendrik R�ller & Frode Steen, 2006. "On the Workings of a Cartel: Evidence from the Norwegian Cement Industry," American Economic Review, American Economic Association, American Economic Association, vol. 96(1), pages 321-338, March.
  4. Ali Hortaçsu & Chad Syverson, 2007. "Cementing Relationships: Vertical Integration, Foreclosure, Productivity, and Prices," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 115, pages 250-301.
  5. Hüschelrath, Kai & Veith, Tobias, 2011. "The impact of cartelization on pricing dynamics: Evidence from the German cement industry," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 11-067, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Robert H. Porter & J. Douglas Zona, 1997. "Ohio School Milk Markets: An Analysis of Bidding," NBER Working Papers 6037, National Bureau of Economic Research, Inc.
  7. Porter, Robert H & Zona, J Douglas, 1993. "Detection of Bid Rigging in Procurement Auctions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(3), pages 518-38, June.
  8. Abrantes-Metz, Rosa M. & Froeb, Luke M. & Geweke, John & Taylor, Christopher T., 2006. "A variance screen for collusion," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(3), pages 467-486, May.
  9. Bryant, Peter G & Eckard, E Woodrow, Jr, 1991. "Price Fixing: The Probability of Getting Caught," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 531-36, August.
  10. Korbinian Blanckenburg & Alexander Geist, 2011. "Detecting illegal activities: the case of cartels," European Journal of Law and Economics, Springer, Springer, vol. 32(1), pages 15-33, August.
  11. Hans W. Friederiszick & Lars-Hendrik Röller, 2010. "Quantification of harm in damages actions for antitrust infringements: Insights from German cartel cases," ESMT Research Working Papers ESMT-10-001, ESMT European School of Management and Technology.
  12. de Roos, Nicolas, 2006. "Examining models of collusion: The market for lysine," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(6), pages 1083-1107, November.
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Cited by:
  1. Korbinian von Blanckenburg & Marc Hanfeld & Konstantin A. Kholodilin, 2013. "A Market Screening Model for Price Inconstancies: Empirical Evidence from German Electricity Markets," Discussion Papers of DIW Berlin 1274, DIW Berlin, German Institute for Economic Research.
  2. Hüschelrath, Kai & Veith, Tobias, 2011. "The impact of cartelization on pricing dynamics: Evidence from the German cement industry," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 11-067, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Hüschelrath, Kai & Müller, Kathrin & Veith, Tobias, 2012. "Estimating damages from price-fixing: The value of transaction data," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 12-036, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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