Are Cartels Forever? Global Evidence Using Quantile Regression Analysis

Polemis, Michael (2024): Are Cartels Forever? Global Evidence Using Quantile Regression Analysis.

Abstract

The longevity of cartels has been a highly contested topic among economists and managers, with numerous researchers arguing that cartels are inherently unstable and their endurance is usually short-lived. Understanding the main factors that influence a cartel duration is essential from a managerial point of view let alone the competition policy perspective. Despite having a large body of literature, there has been no systematic evaluation of the existing driving factors to determine the current understanding and identify potential paths for future research. The present paper employs quantile regression techniques thus allowing for a more thorough and precise depiction of the data in terms of estimations compared to the traditional OLS analysis. The empirical findings support that the number of cartelists imposes an asymmetric effect, reducing (increasing) the lifespan of the collusion only in the short (long) lived cartels. Operating internationally and having a third-party facilitator both lengthen cartels, but the magnitudes of these effects decline monotonically over the range of the distribution. Relative to price-fixing, bid-rigging lengthens cartels in the bottom 20% of the distribution but has no significant effect elsewhere. Finally, the prevalence of leniency programs appears to have no significant effect on cartel duration, except at the very bottom of the distribution where the effect is small in magnitude.

• Item Type: MPRA Paper
• Language: English
• Keywords: Collusion; Longevity; Cartelists; Sanctions; Quantiles
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L4 - Antitrust Issues and Policies > L41 - Monopolization ; Horizontal Anticompetitive Practices

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