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Measuring the effectiveness of anti-cartel interventions : a conceptual framework

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Ulph_EconDiscPap_1602.pdf (586.2Kb)
Date
21/12/2015
Author
Katsoulacos, Yannis
Motchenkova, Evgenia
Ulph, David Tregear
Keywords
Antitrust Enforcement
Antitrust Law
cartel
oligopoly
repeated games
HB Economic Theory
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Abstract
This paper develops a model of the birth and death of cartels in the presence of enforcement activities by a Competition Authority (CA). We distinguish three sets of interventions: (a) detecting, prosecuting and penalising cartels; (b) actions that aim to stop cartel activity in the short-term, immediately following successful prosecution; (c) actions that aim to prevent the re-emergence of prosecuted cartels in the longer term. The last two intervention activities have not been analysed in the existing literature. In addition we take account of the structure and toughness of penalties. In this framework the enforcement activity of a CA causes industries in which cartels form to oscillate between periods of competitive pricing and periods of cartel pricing. We determine the impact of CA activity on deterred, impeded, and suffered harm. We derive measures of both the total and the marginal effects on welfare resulting from competition authority interventions and show how these break down into measures of the Direct Effect of interventions (i.e. the effect due to cartel activity being impeded) and two Indirect/Behavioural Effects – on Deterrence and Pricing. Finally, we calibrate the model and estimate the fraction of the harm that CAs remove as well as the magnitude of total and marginal welfare effects of anti-cartel interventions.
Citation
Katsoulacos , Y , Motchenkova , E & Ulph , D T 2015 ' Measuring the effectiveness of anti-cartel interventions : a conceptual framework ' School of Economics & Finance Discussion Paper , no. 1602 , University of St Andrews , St Andrews , pp. 1-44 .
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ISSN
0962-4031
Type
Working or discussion paper
Rights
(c) Copyright 2016 The authors
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  • University of St Andrews Research
URL
https://ideas.repec.org/p/san/wpecon/1602.html
URI
http://hdl.handle.net/10023/8052

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