Does enforcement deter cartels? A tale of two tails

Iwan Bos, Stephen Davies*, Joseph E. Harrington, Peter L. Ormosi

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Web of Science)

Abstract

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.
Original languageEnglish
Pages (from-to)372-405
Number of pages34
JournalInternational Journal of Industrial Organization
Volume59
DOIs
Publication statusPublished - Jul 2018

JEL classifications

  • c46 - "Specific Distributions; Specific Statistics"
  • k14 - Criminal Law
  • k21 - Antitrust Law
  • l41 - "Monopolization; Horizontal Anticompetitive Practices"

Keywords

  • Anti-cartel enforcement
  • Deterrence
  • Cartel overcharge
  • ANTITRUST ENFORCEMENT
  • PENALTIES
  • AUTHORITY
  • FINES

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