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Measuring the Effectiveness of Anti-Cartel Interventions: A Conceptual Framework

Author

Listed:
  • Yannis Katsoulacos

    (Athens University of Economics and Business, Athens, Greece)

  • Evgenia Motchenkova

    (VU University Amsterdam, the Netherlands)

  • David Ulph

    (University of St Andrews, St Andrews, Fife, Great Britain)

Abstract

This paper develops a model of the birth and death of cartels in the presence of enforcement activities by a Competition Authority (CA). We distinguish three sets of interventions: (a) detecting, prosecuting and penalizing cartels; (b) actions that aim to stop cartel activity in the short-term, immediately following successful prosecution; (c) actions that aim to prevent the re-emergence of prosecuted cartels in the longer term. The last two intervention activities have not been analyzed in the existing literature. In addition we take account of the structure and toughness of penalties. In this framework the enforcement activity of a CA causes industries in which cartels form to oscillate between periods of competitive pricing and periods of cartel pricing. We determine the impact of CA activity on deterred, impeded, and suffered harm. We derive measures of both the total and the marginal effects on welfare resulting from competition authority interventions and show how these break down into measures of the Direct Effect of interventions (i.e. the effect due to cartel activity being impeded) and two Indirect/Behavioral Effects – on Deterrence and Pricing. Finally, we calibrate the model and estimate the fraction of the harm that CAs remove as well as the magnitude of total and marginal welfare effects of anti-cartel interventions.

Suggested Citation

  • Yannis Katsoulacos & Evgenia Motchenkova & David Ulph, 2016. "Measuring the Effectiveness of Anti-Cartel Interventions: A Conceptual Framework," Tinbergen Institute Discussion Papers 16-002/VII, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20160002
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    References listed on IDEAS

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    Cited by:

    1. Stephen Davies & Franco Mariuzzo & Peter L. Ormosi, 2018. "Quantifying The Deterrent Effect Of Anticartel Enforcement," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 1933-1949, October.
    2. Yannis Katsoulacos & Evgenia Motchenkova & David Ulph, 2020. "Penalising on the Basis of the Severity of the Offence: A Sophisticated Revenue-Based Cartel Penalty," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 627-646, November.
    3. Yannis Katsoulacos & Evgenia Motchenkova & David Ulph, 2015. "Measuring the Effectiveness of Anti-cartel Interventions: A Conceptual Framework," Discussion Paper Series, School of Economics and Finance 201602, School of Economics and Finance, University of St Andrews, revised 13 Jan 2016.

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    More about this item

    Keywords

    Antitrust Enforcement; Antitrust Law; Cartel; Oligopoly; Repeated Games;
    All these keywords.

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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