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THE POST-CARTEL EQUILIBRIUM PUZZLE IN THE GERMAN CEMENT MARKET: A REPLY TO HÜSCHELRATH, MÜLLER, and VEITH

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  • Niels Frank
  • Philipp Schliffke

Abstract

Kai Hüschelrath, Kathrin Müller, and Tobias Veith study the German cement cartel that lasted from the beginning of the 1990s until the end of 2001.1 Using both a during-and-after and a yardstick difference-in-difference approach, they estimate cartel overcharges between 20 percent and 26.5 percent, pointing out that they have explicitly considered alternative post-cartel transition periods. We show that the authors fail to account for the most important aspect of damage estimation in that case—a punishment phase that followed the internal breakdown of the cartel. The result is an estimated overcharge that is more than twice as large as it was estimated during court proceedings. We develop a simple procedure that helps to estimate the length of the post-cartel off-equilibrium period. Using this procedure, we show that any overcharge estimation that is not considering this punishment phase is highly non-robust and yields upward biased overcharge estimates.

Suggested Citation

  • Niels Frank & Philipp Schliffke, 2013. "THE POST-CARTEL EQUILIBRIUM PUZZLE IN THE GERMAN CEMENT MARKET: A REPLY TO HÜSCHELRATH, MÜLLER, and VEITH," Journal of Competition Law and Economics, Oxford University Press, vol. 9(2), pages 495-509.
    • Handle: RePEc:oup:jcomle:v:9:y:2013:i:2:p:495-509.
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    File URL: http://hdl.handle.net/10.1093/joclec/nht015
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    Cited by:

    1. Willem H. Boshoff, 2015. "Illegal Cartel Overcharges in Markets with a Legal Cartel History: Bitumen Prices in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 83(2), pages 220-239, June.
    2. Yaseen GHULAM, 2018. "The Impact Of Reforms And Privatization On Firms’ Conduct In The Presence Of Interconnected Conglomerates And Weak And Inefficient Regulatory Institutions," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(4), pages 599-622, December.

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation

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