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The impact of cartelization on pricing dynamics: Evidence from the German cement industry

  • Hüschelrath, Kai
  • Veith, Tobias

Although the pricing dynamics of hardcore cartels have been studied intensively from a theoretical perspective, empirical evidence is still rare. We combine publicly available data with a unique private data set of about 340,000 market transactions from 36 smaller and larger customers of German cement producers to study the pricing dynamics during and after the breakdown of a German cement cartel. We find that, first, after the breakdown of the cartel, cartel members reduce net prices to a far larger extent than gross prices and that, second, noncartel members slip under the price umbrella of the cartel to increase profits. Our results have important implications for both the design of screening tools to detect cartels as part of public enforcement and the calculation of damages as part of private enforcement of competition law.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 11-067.

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Date of creation: 2011
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Handle: RePEc:zbw:zewdip:11067
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  1. Joseph E. Harrington, Jr., 2003. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Computing in Economics and Finance 2003 26, Society for Computational Economics.
  2. Hans W. Friederiszick & Lars-Hendrik Röller, 2010. "Quantification of harm in damages actions for antitrust infringements: Insights from German cartel cases," ESMT Research Working Papers ESMT-10-001, ESMT European School of Management and Technology.
  3. Symeonidis, George, 1999. "Price Competition and Market Structure: The Impact of Cartel Policy on Concentration in the UK," CEPR Discussion Papers 2308, C.E.P.R. Discussion Papers.
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  13. Hüschelrath, Kai & Veith, Tobias, 2011. "Cartel detection in procurement markets," ZEW Discussion Papers 11-066, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  14. Aubert, Cecile & Rey, Patrick & Kovacic, William E., 2006. "The impact of leniency and whistle-blowing programs on cartels," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1241-1266, November.
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  16. John Asker, 2010. "A Study of the Internal Organization of a Bidding Cartel," American Economic Review, American Economic Association, vol. 100(3), pages 724-62, June.
  17. 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.
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