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Effects of different cartel policies: evidence from the German power-cable industry

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  • Hans-Theo Normann
  • Elaine S. Tan

Abstract

We analyze the effects of cartel policies on firm behavior using data from the German power-cable cartel. Antitrust authorities affected the cartel under two different legal regimes: penalizing the cartel in some years, and exempting it for 10 years from the general cartel prohibition. While penalties did not reduce prices or profits, making collusion legal raised profits by at least 16% each year, compared with the time when the illegal cartel was not prosecuted. The threat of penalties was sufficient to reduce profit from collusion. The intended efficiency gains from rationalization, which was the justification for legalizing the cartel, did not materialize.

Suggested Citation

  • Hans-Theo Normann & Elaine S. Tan, 2014. "Effects of different cartel policies: evidence from the German power-cable industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 23(4), pages 1037-1057.
    • Handle: RePEc:oup:indcch:v:23:y:2014:i:4:p:1037-1057.
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    File URL: http://hdl.handle.net/10.1093/icc/dtt035
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    Cited by:

    1. Matthias Hunold & Kai Hüschelrath & Ulrich Laitenberger & Johannes Muthers, 2020. "Competition, Collusion, and Spatial Sales Patterns: Theory and Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 68(4), pages 737-779, December.
    2. Andres, Maximilian & Bruttel, Lisa & Friedrichsen, Jana, 2023. "How communication makes the difference between a cartel and tacit collusion: A machine learning approach," European Economic Review, Elsevier, vol. 152(C).
    3. Muthers, Johannes & Hunold, Matthias, 2017. "Capacity constrained price competition with transportation costs," VfS Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168248, Verein für Socialpolitik / German Economic Association.
    4. Matthias Hunold & Johannes Muthers, 2018. "Spatial Competition with Capacity Constraints and Subcontracting," Economics working papers 2018-13, Department of Economics, Johannes Kepler University Linz, Austria.

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