Discussion paper

DP7761 Cartels Uncovered

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.


Steen, F, O Toivanen and A Hyytinen (2010), ‘DP7761 Cartels Uncovered‘, CEPR Discussion Paper No. 7761. CEPR Press, Paris & London. https://cepr.org/publications/dp7761