Does enforcement deter cartels? A tale of two tails

Bos, Iwan, Davies, Stephen, Harrington Jr, Joseph E. and Ormosi, Peter L. (2018) Does enforcement deter cartels? A tale of two tails. International Journal of Industrial Organization, 59. pp. 372-405. ISSN 0167-7187

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This paper investigates the deterrent impact of anti-cartel enforcement. It is shown theoretically that if enforcement is effective in deterring and constraining cartels then there will be fewer cartels with low overcharges and fewer with high overcharges. This prediction provides an indirect method for testing whether the enforcement of competition law is effective. Using historical data on legal cartels to generate the counterfactual, we find significantly less mass in the tails of the overcharge distribution, compared to illegal cartels. This result is robust to controlling for confounding factors, and we interpret this as the first tentative confirmation of effective deterrence.

Item Type: Article
Uncontrolled Keywords: anti-cartel enforcement,deterrence,cartel overcharge
Faculty \ School: Faculty of Social Sciences > School of Economics
Faculty of Social Sciences > Norwich Business School
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Depositing User: Pure Connector
Date Deposited: 11 May 2018 10:30
Last Modified: 05 May 2020 00:38
DOI: 10.1016/j.ijindorg.2018.04.005

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