Discussion Paper Details

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Title: Anatomy of Cartel Contracts

Author(s): Ari Hyytinen, Frode Steen and Otto Toivanen

Publication Date: February 2013

Keyword(s): antitrust, cartels, competition policy, contracts and industry heterogeneity

Programme Area(s): Industrial Organization

Abstract: We study cartel contracts using data on 18 contract clauses of 109 legal Finnish manufacturing cartels. One third of the clauses relate to raising profits; the others deal with instability through incentive compatibility, cartel organization, or external threats. Cartels use three main approaches to raise profits: Price, market allocation, and specialization. These appear to be substitutes. Choosing one has implications on how cartels deal with instability. Simplifying, we find that large cartels agree on prices, cartels in homogenous goods industries allocate markets, and small cartels avoid competition through specialization.

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Bibliographic Reference

Hyytinen, A, Steen, F and Toivanen, O. 2013. 'Anatomy of Cartel Contracts'. London, Centre for Economic Policy Research.