IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/55363.html
   My bibliography  Save this paper

Cartel Detection and Collusion Screening: An Empirical Analysis of the London Metal Exchange

Author

Listed:
  • Samà, Danilo

Abstract

In order to fight collusive behaviors, the best scenario for competition authorities would be the possibility to analyze detailed information on firms' costs and prices, being the price-cost margin a robust indicator of market power. However, information on firms' costs is rarely available. In this context, a fascinating technique to detect data manipulation and rigged prices is offered by an odd phenomenon called Benford's Law, otherwise known as First-Digit Law, which has been successfully employed to discover the ``Libor Scandal'' much time before the opening of the cartel settlement procedure. Thus, the main objective of the present paper is to apply a such useful instrument to track the price of the aluminium traded on the London Metal Exchange, following the allegations according to which there would be an aluminium cartel behind. As a result, quick tests such as Benford's Law can only be helpful to inspect markets where price patterns show signs of collusion. Given the budget constraints to which antitrust watchdogs are commonly subject to, a such price screen could be set up, just exploiting the data available, as warning system to identify cases that require further investigations.

Suggested Citation

  • Samà, Danilo, 2014. "Cartel Detection and Collusion Screening: An Empirical Analysis of the London Metal Exchange," MPRA Paper 55363, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:55363
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/55363/1/MPRA_paper_55363.pdf
    File Function: original version
    Download Restriction: no

    File URL: https://mpra.ub.uni-muenchen.de/103087/1/MPRA_paper_55363.pdf
    File Function: revised version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bernhard Rauch & Max Göttsche & Gernot Brähler & Stefan Engel, 2011. "Fact and Fiction in EU‐Governmental Economic Data," German Economic Review, Verein für Socialpolitik, vol. 12(3), pages 243-255, August.
    2. Rosa Abrantes-Metz & Sofia Villas-Boas & George Judge, 2011. "Tracking the Libor rate," Applied Economics Letters, Taylor & Francis Journals, vol. 18(10), pages 893-899.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brown, David P. & Eckert, Andrew & Silveira, Douglas, 2023. "Screening for Collusion in Wholesale Electricity Markets: A Review of the Literature," Working Papers 2023-7, University of Alberta, Department of Economics.
    2. Frédéric Marty & Thierry Warin, 2023. "Deciphering Algorithmic Collusion: Insights from Bandit Algorithms and Implications for Antitrust Enforcement," CIRANO Working Papers 2023s-26, CIRANO.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Samà, Danilo, 2014. "Essays on economic analysis of competition law: theory and practice," MPRA Paper 103118, University Library of Munich, Germany.
    2. Ausloos, Marcel & Cerqueti, Roy & Mir, Tariq A., 2017. "Data science for assessing possible tax income manipulation: The case of Italy," Chaos, Solitons & Fractals, Elsevier, vol. 104(C), pages 238-256.
    3. Ausloos, Marcel & Castellano, Rosella & Cerqueti, Roy, 2016. "Regularities and discrepancies of credit default swaps: a data science approach through Benford's law," Chaos, Solitons & Fractals, Elsevier, vol. 90(C), pages 8-17.
    4. Javier D. Donna & José†Antonio Espín†Sánchez, 2018. "Complements and substitutes in sequential auctions: the case of water auctions," RAND Journal of Economics, RAND Corporation, vol. 49(1), pages 87-127, March.
    5. Tariq Ahmad Mir & Marcel Ausloos & Roy Cerqueti, 2014. "Benford's law predicted digit distribution of aggregated income taxes: the surprising conformity of Italian cities and regions," Papers 1410.2890, arXiv.org.
    6. Aineas Kostas Mallios, 2023. "Manipulation in reported dividends: Empirical evidence from US banks," Economics Bulletin, AccessEcon, vol. 43(1), pages 441-461.
    7. Nicole El Karoui & Stéphane Loisel & Jean-Luc Prigent & Julien Vedani, 2017. "Market inconsistencies of the market-consistent European life insurance economic valuations: pitfalls and practical solutions," Post-Print hal-01242023, HAL.
    8. César Carrera, 2015. "Tracking exchange rate management in Latin America," Review of Financial Economics, John Wiley & Sons, vol. 25(1), pages 35-41, April.
    9. Natasa Omerzu & Iztok Kolar, 2019. "Do the Financial Statements of Listed Companies on the Ljubljana Stock Exchange Pass the Benford’s Law Test?," International Business Research, Canadian Center of Science and Education, vol. 12(1), pages 54-64, January.
    10. Theoharry Grammatikos & Nikolaos I. Papanikolaou, 2021. "Applying Benford’s Law to Detect Accounting Data Manipulation in the Banking Industry," Journal of Financial Services Research, Springer;Western Finance Association, vol. 59(1), pages 115-142, April.
    11. El Mouaaouy Florian & Riepe Jan, 2018. "Benford and the Internal Capital Market: A Useful Indicator of Managerial Engagement," German Economic Review, De Gruyter, vol. 19(3), pages 309-329, August.
    12. Aurelio Fernandez Bariviera & María Belén Guercio & Lisana B. Martinez & Osvaldo A. Rosso, 2015. "The (in)visible hand in the Libor market: an information theory approach," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 88(8), pages 1-9, August.
    13. David P. Brown & Andrew Eckert & James Lin, 2018. "Information and transparency in wholesale electricity markets: evidence from Alberta," Journal of Regulatory Economics, Springer, vol. 54(3), pages 292-330, December.
    14. Thomas Stoerk, 2015. "Statistical corruption in Beijing’s air quality data has likely ended in 2012," GRI Working Papers 194, Grantham Research Institute on Climate Change and the Environment.
    15. Clippe, Paulette & Ausloos, Marcel, 2012. "Benford’s law and Theil transform of financial data," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(24), pages 6556-6567.
    16. Lilian Muchimba, 2022. "Connectedness of money market instruments: A time-varying vector autoregression approach," Working Papers in Economics & Finance 2022-07, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    17. Miranda-Zanetti, Maximilano & Delbianco, Fernando & Tohmé, Fernando, 2019. "Tampering with inflation data: A Benford law-based analysis of national statistics in Argentina," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 525(C), pages 761-770.
    18. Florian El Mouaaouy & Jan Riepe, 2018. "Benford and the Internal Capital Market: A Useful Indicator of Managerial Engagement," German Economic Review, Verein für Socialpolitik, vol. 19(3), pages 309-329, August.
    19. Robert Brooks & Brandon N. Cline & Pavel Teterin & Yu You, 2022. "The information in global interest rate futures contracts," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(6), pages 1135-1166, June.
    20. Montag, Josef, 2017. "Identifying odometer fraud in used car market data," Transport Policy, Elsevier, vol. 60(C), pages 10-23.

    More about this item

    Keywords

    Benford's Law; Cartel Detection; Collusion Screening; Competition Authorities; Data Manipulation; Monopolization; Oligopolistic Markets; Price Fixing; Variance Screen;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:55363. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.