Market Structure and Price Collusion: An Empirical Analysis

Frass, Arthur G.; Greer, Douglas F.

doi:10.2307/2098328

Cited by 94 publications

(44 citation statements)

References 7 publications

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“…They concluded that firms in highly concentrated industries characterized by low entry barriers are more collusion prone. Likewise, Fraas and Greer (1977) Contrary to the findings above, Asch and Seneca (1976) and Dick (1996) reported that industry concentration is negatively related to incidence of collusion. More specifically, Dick (1996) studied legal and privately enforced industry cartels that formed under the WebbPomerene Export Trade Act, and found that cartels are more apt to form in industries that had many small firms.…”

Section: Number Of Firmscontrasting

confidence: 57%

Exploring National Concerted Practices in an Open Small Economy: What Does the Change in the Competition Law in the Netherlands Reveal?

Özbuğday

2011

SSRN Journal

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The present study examines the impact of several industry characteristics on the propensity to collude using a dataset on the existence of collusion across Dutch industries during the late 1990s and early 2000s. The results of the Probit model with sample selection indicate that our sample of Dutch concerted practices is non-random in the sense that it only consists of anticompetitive agreements that were subject of an antitrust immunity behavior. Our bivariate probit model with sample selection indicates that concerted practices are less likely to be seen in service industries relative to manufacturing industries. The results also show that it is more likely that firms engaged in concerted practices in unconcentrated industries. Furthermore, we could not find a non-linear relationship between concentration and the presence of collusion. There is also strong evidence from all the regressions that concerted practices are less likely in industries where entry is more possible. Interestingly, our estimation results indicate that there is a positive correlation between cartel prevalence and import penetration, which implies that import competition did not discipline firm behavior and foreign importers joined the cartel paradise in the Netherlands. As to the role of measures of asymmetry on concerted practice prevalence, the association between patenting activity and propensity to engage in collusion is ambiguous in the current setting, while advertising intensity, as the second measure of asymmetry, is associated with increased likelihood of collusion. Contrary to the previous empirical findings, market growth has been found to have a negative effect on the probability of a concerted practice in an industry. Furthermore, our proposition that growing demand might attract new entrants, which, in turn, hampers collusion, has been falsified in the current context. cross-border cartels that involved private firms. If one takes the within-border cartel cases and undetected cartels into account, the number is enormous.More importantly than the number of cartel cases, the damage they give to the economy has made economists and policymakers worry about the phenomenon of collusion. A recent studyby Connor (2004) reveals that the median increase in price resulting from collusion was about 25 %, which shows how effective these collective agreements among firms are. Similarly, Griffin (1989) finds that cartels in his sample charged a 45 % markup over marginal costs on average.Given the enormity of cases, and the welfare transfers they have caused, the detection of cartels-which is a longstanding antitrust problem-is highly essential. In this respect, it is important for regulatory bodies to develop structural screens to forecast where and under which conditions cartels are more likely to be formed, which will help them allocate investigative resources where they would be most constructive. According to Harrington (2008), this screening process is the first stage of a multi-stage process of the detection of cartels, which...

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Section: Number Of Firmscontrasting

confidence: 57%

Exploring National Concerted Practices in an Open Small Economy: What Does the Change in the Competition Law in the Netherlands Reveal?

Özbuğday

2011

SSRN Journal

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“…Other textbooks have far fewer numbers of cartels cited. 25 Hay and Kelley (1974) authored a classic review of 65 US price fixing conspiracies, which Fraas and Greer (1977) extended to 606 cases from 1910 to 1972. Both studies contain a wealth of information about the number of conspirators, duration, industry, and specific collusive methods employed.…”

Section: Traditional Surveys Of Cartel Overchargesmentioning

confidence: 99%

Cartel overcharges: Survey and meta-analysis

Connor

Bolotova

2006

International Journal of Industrial Organization

135

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“…2 Yet, the reality of antitrust enforcement is different: cartels often involve many firms. Empirical evidence suggests that the median number of cartel members lies between six and ten (Posner, 1970;Hay and Kelley, 1974;Fraas and Greer, 1977), and cartels with more than a dozen members are common. 3 While this type of evidence is obviously hard to find for tacit collusive agreements, a few cases indicate that these agreements exhibit a similar pattern.…”

Section: Introductionmentioning

confidence: 99%

Collusion among many firms: The disciplinary power of targeted punishment

Roux

Thöni

2015

Journal of Economic Behavior & Organization

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a b s t r a c tWe explore targeted punishment as an explanation for collusion among many firms. We run a series of Cournot oligopoly experiments with and without the possibility of targeting punishment at specific market participants. In markets with two, four, six, and eight firms, we analyze to what extent targeted punishment helps firms to restrict output. We find that targeted punishment leads to more collusion across all markets. Furthermore, beyond two firms, this collusive effect turns out to be even stronger in markets with more competitors, suggesting a reversal of the conventional wisdom that collusion is easier with fewer firms. for valuable comments and discussions. We would also like to thank participants at various conferences and seminars. Financial support from the Richard Büchner-Stiftung is gratefully acknowledged. The usual disclaimer applies.

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Market Structure and Price Collusion: An Empirical Analysis

Cited by 94 publications

References 7 publications

Exploring National Concerted Practices in an Open Small Economy: What Does the Change in the Competition Law in the Netherlands Reveal?

Exploring National Concerted Practices in an Open Small Economy: What Does the Change in the Competition Law in the Netherlands Reveal?

Cartel overcharges: Survey and meta-analysis

Collusion among many firms: The disciplinary power of targeted punishment

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