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When do firms leave cartels? Determinants and the impact on cartel survival

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  • Hellwig, Michael
  • Hüschelrath, Kai

Abstract

We use a dataset of 615 firms which participated in 114 illegal cartels - convicted by the European Commission between 1999 and 2016 - to investigate the determinants of the duration of a firm's participation in a cartel. Applying a Weibull proportional hazard model with a particular focus on the impact of internal and external time-varying determinants, we find that firms show an increased probability to leave a cartel if prior exits occurred as well as in periods of high demand growth. However, we find a reduced exit probability in situations of prior entries to the cartel or in periods of high interest rates. Additional estimations on the cartel level further suggest that firm exits increase the probability of a cartel breakdown substantially.

Suggested Citation

  • Hellwig, Michael & Hüschelrath, Kai, 2017. "When do firms leave cartels? Determinants and the impact on cartel survival," ZEW Discussion Papers 17-002, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:17002
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    Cited by:

    1. Forsbacka, Tove & Le Coq, Chloé & Marvão, Catarina, 2023. "Cartel birth and death dynamics: Empirical evidence," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    2. von Auer, Ludwig & Pham, Tu Anh, 2020. "Optimal Destabilization of Cartels," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224521, Verein für Socialpolitik / German Economic Association.
    3. Sven Heim & Kai Hhschelrath & Ulrich Laitenberger & Yossi Spiegel, 2017. "Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs," Working Papers hal-01952937, HAL.
    4. Jochem, Annabelle & Parrotta, Pierpaolo & Valletta, Giacomo, 2020. "The impact of the 2002 reform of the EU leniency program on cartel outcomes," International Journal of Industrial Organization, Elsevier, vol. 71(C).
    5. Ludwig von Auer & Tu Anh Pham, 2019. "Optimal Destabilization of Cartels," Research Papers in Economics 2019-07, University of Trier, Department of Economics.
    6. Wawa W. Nkosi & Willem H. Boshoff, 2022. "Characteristics of Prosecuted Cartels and Cartel Enforcement in South Africa," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 60(3), pages 327-360, May.
    7. Adam Karbowski, 2020. "A Note on Patents and Leniency," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 97-108.
    8. Lenhard, Severin, 2024. "Cartel Stability in Times of Low Interest Rates," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302361, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Survival Analysis; Cartels; Duration; European Union;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices

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