The Econometrics of Cartel Overcharges
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 careful 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 for cartels with initial overcharge estimates lying between 0% and 50%.a bias-corrected mean overcharge estimate of 13.6% with a median of 13.6% and for all cartels of all types a bias-corrected mean of 17.5% with a median of 14.1%.
|Date of creation:||12 Oct 2011|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00631429|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
References listed on IDEAS
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.:
- John Connor, 2001. "“Our Customers Are Our Enemies”: The Lysine Cartel of 1992–1995," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(1), pages 5-21, February.
- 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.
- Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
- Gary S. Becker, 1974.
"Crime and Punishment: An Economic Approach,"
in: Essays in the Economics of Crime and Punishment, pages 1-54
National Bureau of Economic Research, Inc.
- Bolotova, Yuliya & Connor, John M. & Miller, Douglas J., 2008.
"The impact of collusion on price behavior: Empirical results from two recent cases,"
International Journal of Industrial Organization,
Elsevier, vol. 26(6), pages 1290-1307, November.
- Bolotova, Yuliya & Connor, John M. & Miller, Douglas J., 2005. "The Impact of Collusion on Price Behavior: Empirical Results from Two Recent Cases," 2005 Annual meeting, July 24-27, Providence, RI 19164, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- John M. Connor, 2000. "Archer Daniels Midland:Price Fixer To The World," Working Papers 00-11, Purdue University, College of Agriculture, Department of Agricultural Economics.
- Lawrence J. White, 1999.
"Lysine and Price Fixing: How Long? How Severe?,"
99-02, New York University, Leonard N. Stern School of Business, Department of Economics.
- Valerie Y. Suslow, 1986. "Estimating Monopoly Behavior with Competitive Recycling: An Application to Alcoa," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 389-403, Autumn.
- Bosch, Jean-Claude & Eckard, E Woodrow, Jr, 1991. "The Profitability of Price Fixing: Evidence from Stock Market Reaction to Federal Indictments," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 309-17, May.
- Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00631429. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)
If references are entirely missing, you can add them using this form.