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The Econometrics of Cartel Overcharges

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  • Marcel Boyer

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, UdeM - Université de Montréal)

  • Rachidi Kotchoni

    (University of Alberta)

Abstract

Connor and Lande (2006) conducted a survey of cartel overcharge estimates and found an average in the range of 31% to 49%. By examining more sources, Connor (2010b) finds a median of 23.3% for all type of cartels and a mean of 50.4% for successful cartels. However, the data used in these studies are estimates rather than true observations, since the true illegal profits of cartels are rarely observable. Therefore, these data are subject to model error, estimation error and publication bias. A quick glance at the Connor database reveals that the universe of overcharge estimates is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimates are potentially biased, fitting a linear OLS model to the data without providing a careful treatment of the problems raised by the publication bias, outliers, asymmetry, and heterogeneity will necessarily produce distorted results. We conduct a meta-analysis of cartel overcharge estimates in the spirit of Connor and Bolotova (2006), but providing a sound treatment of the matters raised above. We find for cartels with initial overcharge estimates lying between 0% and 50%.a bias-corrected mean overcharge estimate of 13.6% with a median of 13.6% and for all cartels of all types a bias-corrected mean of 17.5% with a median of 14.1%.

Suggested Citation

  • Marcel Boyer & Rachidi Kotchoni, 2011. "The Econometrics of Cartel Overcharges," Working Papers hal-00631429, HAL.
  • Handle: RePEc:hal:wpaper:hal-00631429
    Note: View the original document on HAL open archive server: https://hal.science/hal-00631429
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    References listed on IDEAS

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    Cited by:

    1. Marcel Boyer & Rachidi Kotchoni, 2015. "How Much Do Cartel Overcharge?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(2), pages 119-153, September.
    2. John M. Connor & Robert H. Lande, 2017. "Comment on “The Empirical Basis for Antitrust: Cartels, Mergers, and Remedies”," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 24(3), pages 329-338, September.
    3. Salvatore Piccolo & Giancarlo Spagnolo, 2014. "Debt, Managers and Cartels," CSEF Working Papers 365, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    4. Katsoulacos, Yannis & Motchenkova, Evgenia & Ulph, David, 2015. "Penalizing cartels: The case for basing penalties on price overcharge," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 70-80.
    5. Vasiliki Bageri & Yannis Katsoulacos, 2023. "Measuring the effects of information exchange on incentives to collude using calibrated simulations (with an example of the South African oil industry)," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 1846-1875, June.
    6. Stephen Davies & Peter Ormosi, 2013. "The Impact of Competition Policy: What are the Known Unknowns?," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-07, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    7. Marie-Laure Allain & Marcel Boyer & Jean-Pierre Ponssard & Rachidi Kotchoni, 2011. "The Determination of Optimal Fines in Cartel Cases - The Myth of Underdeterrence," CIRANO Working Papers 2011s-34, CIRANO.
    8. Shastitko, Andrey (Шаститко, Андрей) & Golovanova, Svetlana (Голованова, Светлана), 2015. "'Comparable Markets' as a Tool of Antitrust Policy: Design, Application Experience, Development Directions [«Сопоставимые Рынки» Как Инструмент Антимонопольной Политики: Дизайн, Опыт Применения, На," Published Papers mn31, Russian Presidential Academy of National Economy and Public Administration.
    9. Piccolo, Salvatore & Pignataro, Aldo, 2018. "Consumer loss aversion, product experimentation and tacit collusion," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 49-77.
    10. Iwan Bos & Stephen Davies & Peter L. Ormosi, 2014. "The deterrent effect of anti-cartel enforcement: A tale of two tails," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2014-06v2, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    11. Panayiotis Agisilaou, 2013. "Collusion in Industrial Economics and Optimally Designed Leniency Programmes - A Survey," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-03, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    12. Katsoulacos, Yannis & Motchenkova, Evgenia & Ulph, David, 2015. "Penalizing cartels: The case for basing penalties on price overcharge," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 70-80.
    13. Marcel Boyer & Rachidi Kotchoni, 2015. "How Much Do Cartel Overcharge? (The "Working Paper" Version)," CIRANO Working Papers 2015s-37, CIRANO.

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    Keywords

    Cartels; Overcharges;

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