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A merger approach to cartel overcharge analysis

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  • Neurohr, Bertram

Abstract

To the extent that cartels are effective at maximizing joint profits, they are akin to multi-firm mergers. This paper draws from merger analysis — in particular upward pricing pressure — to construct a model of cartel overcharges. For practitioners, this approach has the benefit that it strikes an appropriate balance between simplicity and flexibility. Moreover, it relies mostly on data on margins and diversion ratios and can thus be used as either a complement or alternative to empirical approaches based, for example, on historical price data.

Suggested Citation

  • Neurohr, Bertram, 2018. "A merger approach to cartel overcharge analysis," Economics Letters, Elsevier, vol. 168(C), pages 28-30.
    • Handle: RePEc:eee:ecolet:v:168:y:2018:i:c:p:28-30
    DOI: 10.1016/j.econlet.2018.03.032
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    References listed on IDEAS

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    1. Farrell Joseph & Shapiro Carl, 2010. "Antitrust Evaluation of Horizontal Mergers: An Economic Alternative to Market Definition," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-41, March.
    2. E. Glen Weyl & Michal Fabinger, 2013. "Pass-Through as an Economic Tool: Principles of Incidence under Imperfect Competition," Journal of Political Economy, University of Chicago Press, vol. 121(3), pages 528-583.
    3. Werden, Gregory J, 1996. "A Robust Test for Consumer Welfare Enhancing Mergers among Sellers of Differentiated Products," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 409-413, December.
    4. FRANK VERBOVEN & THEON van DIJK, 2009. "Cartel Damages Claims And The Passing‐On Defense," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 457-491, September.
    5. Bertram Neurohr, 2016. "A tractable cost pass-through benchmark," Economics Bulletin, AccessEcon, vol. 36(3), pages 1603-1608.
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    1. Correa-Giraldo, Manuel & Garcia-Rendon, John J. & Perez, Alex, 2021. "Strategic behaviors and transfer of wholesale costs to retail prices in the electricity market: Evidence from Colombia," Energy Economics, Elsevier, vol. 99(C).

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