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Anatomy of Cartel Contracts

  • Hyytinen, Ari

    ()

    (University of Jyväskylã)

  • Steen, Frode

    ()

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Toivanen, Otto

    ()

    (K.U.Leuven)

We study cartel contracts using data on 18 contract clauses of 109 legal Finnish manufacturing cartels. One third of the clauses relate to raising profits; the others deal with instability through incentive compatibility,cartel organization, or external threats. Cartels use three main approaches to raise profits: Price, market allocation, and specialization. These appear to be substitutes. Choosing one has implications on how cartels deal with instability. Simplifying, we find that large cartels agree on prices, cartels in homogenous goods industries allocate markets, and small cartels avoid competition through specialization.

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Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 25/2012.

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Length: 56 pages
Date of creation: 31 Dec 2012
Date of revision:
Handle: RePEc:hhs:nhheco:2012_025
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