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Using Accounting Data in Cartel Damage Calculations – Blessing or Menace?

Author

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  • Johannes Paha

    () (Justus-Liebig-University Gießen)

Abstract

Standard methods for calculating cartel-damages rely on data of prices charged and quantity sold. Such data may not easily be available. In this paper, it is shown that a lower bound for cartel-damages can also be computed from accounting data. In previous literature it is shown that economic profits can hardly be inferred from accounting data. Therefore, it is shown under which econometrically testable assumptions on accounting costs a meaningful lower bound for cartel damages can consistently be estimated from accounting data. An estimation of cartel-damages is performed for four vitamins producers that participated in the vitamins cartel. The results indicate that both the aggregation-level and the publication-frequency of accounting data pose a challenge to the estimation of cartel damages. A further challenge is to appropriately reflect the strength respectively effectiveness of the collusive agreement in the specification of any such estimation.

Suggested Citation

  • Johannes Paha, 2009. "Using Accounting Data in Cartel Damage Calculations – Blessing or Menace?," MAGKS Papers on Economics 200929, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  • Handle: RePEc:mar:magkse:200929
    as

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    File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/29-2009_paha.pdf
    File Function: First version, 2009
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    References listed on IDEAS

    as
    1. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    2. John Haltiwanger & Joseph E. Harrington Jr., 1991. "The Impact of Cyclical Demand Movements on Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 89-106, Spring.
    3. Johannes Paha, 2011. "Empirical methods in the analysis of collusion," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(3), pages 389-415, July.
    4. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
    5. Long, William F & Ravenscraft, David J, 1984. "The Misuse of Accounting Rates of Return: Comment," American Economic Review, American Economic Association, vol. 74(3), pages 494-500, June.
    6. Fisher, Franklin M & McGowan, John J, 1983. "On the Misuse of Accounting Rates of Return to Infer Monopoly Profits," American Economic Review, American Economic Association, vol. 73(1), pages 82-97, March.
    7. Marshall, Robert C. & Marx, Leslie M. & Raiff, Matthew E., 2008. "Cartel price announcements: The vitamins industry," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 762-802, May.
    8. Fisher, Franklin M, 1984. "The Misuse of Accounting Rates of Return: Reply," American Economic Review, American Economic Association, vol. 74(3), pages 509-517, June.
    9. Bartholdy, Jan & Peare, Paula, 2005. "Estimation of expected return: CAPM vs. Fama and French," International Review of Financial Analysis, Elsevier, vol. 14(4), pages 407-427.
    10. Peasnell, Kenneth V., 1996. "Using accounting data to measure the economic performance of firms," Journal of Accounting and Public Policy, Elsevier, vol. 15(4), pages 291-303.
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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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