DP7761 Cartels Uncovered
|Author(s):||Ari Hyytinen, Frode Steen, Otto Toivanen|
|Publication Date:||March 2010|
|Keyword(s):||antitrust, cartel, competition, detection, Hidden Markov models, illegal, legal, leniency, policy, registry|
|JEL(s):||L0, L4, L40, L41, L60|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=7761|
How many cartels are there? The answer is important in assessing the efficiency of competition policy. We present a Hidden Markov Model that answers the question, taking into account that often we do not know whether a cartel exists in an industry or not. Our model identifies key policy parameters from data generated under different competition policy regimes and may be used with time-series or panel data. We take the model to data from a period of legal cartels - Finnish manufacturing industries 1951 - 1990. Our estimates suggest that by the end of the period, almost all industries were cartelized.