Advertisement

Cartel Damages to the Economy: An Assessment for Developing Countries

  • Marc IvaldiEmail author
  • Frédéric Jenny
  • Aleksandra Khimich
Chapter
Part of the International Law and Economics book series (ILEC)

Abstract

The competition policy implementation and enforcement, including cartel deterrence and detection, require substantial investments. Therefore, it is important to understand to which extent these investments are compensated in terms of prevented damages to consumers. Answer to this question is especially important for developing countries for which decision to create or reinforce an antitrust authority largely depends on associated costs, while the sufficient and robust quantitative evaluation of potential benefits is still missing. The present study aims at providing the missing evidence by assessing the aggregate economic harm caused by cartels in developing countries. We find that economic damage of cartels already detected in developing countries is substantial—in terms of affected sales related to GDP the maximal rate reaches up to 6.38 %, while excess profits resulting from unjustified price overcharges reach up to 1 % when related to GDP. Furthermore, if one wants to take into account cartels that were not detected, the total damage appears at least four times larger.

Keywords

Hard-core cartel Developing countries Cartel damages Antitrust Cartel deterrence Price overcharge 

JEL Classifications

L12 L42 K22 B14 F29 

References

  1. Allain, M. L., Boyer, M., Kotchoni, R., & Ponssard, J. P. (2011). The determination of optimal fines in cartel cases: The myth of underdeterrence. Available at http://www.cirano.qc.ca/files/publications/2011s-34.pdf
  2. Anderson, S., de Palma, A., & Thisse, J.-F. (1992). Discrete choice theory of product differentiation. Cambridge, MA: MIT Press.Google Scholar
  3. Berry, S. T. (1994). Estimating discrete-choice models of product differentiation. RAND Journal of Economics, 25(2), 242–262.CrossRefGoogle Scholar
  4. Boyer, M., & Kotchoni, R. (2014). How much do cartels overcharge?, previous (published) version of the paper can be found at http://ssrn.com/abstract=2076055
  5. Bryant, P., & Eckard, E. W. (1991). Price fixing: The probability of getting caught. The Review of Economics and Statistics, 73(3), 531–536.CrossRefGoogle Scholar
  6. Combe, E., Monnier, C., & Legal, R. (2008). Cartels: The probability of getting caught in the European Union. Available at SSRN: http://ssrn.com/abstract=1015061
  7. Connor, J. M. (2010). Price-fixing overcharges, 2nd edition. Available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1610262.
  8. Connor, J. M. (2011a, September 22). Price effects of international cartels in markets for primary products. In Materials of the symposium on trade in primary product markets and competition policy at the World Trade Organization.Google Scholar
  9. Connor, J. M. (2011b). “Cartels portrayed” working papers series (Working Papers No. 11-06, 11-03, 11-04, 11-05, 11-06 and 11-07). The American Antitrust Institute.Google Scholar
  10. Hammond, S. D. (2005, June 6). Optimal sanctions, optimal deterrence. Presented at ICN annual conference, Bonn, Germany.Google Scholar
  11. Jenny, F. (2006). Cartels and collusion in developing countries: Lessons from empirical evidence. World Competition, 29(1), 109–137.Google Scholar
  12. Levenstein, M. C., Suslow, V. Y., & Oswald, L. J. (2003). Contemporary international cartels and developing countries: Economic effects and implications for competition policy (Working Paper #03-10).Google Scholar
  13. Motta, M. (2004). Competition policy: Theory and practice. Cambridge: Cambridge University Press.CrossRefGoogle Scholar

Copyright information

© Springer International Publishing Switzerland 2016

Authors and Affiliations

  • Marc Ivaldi
    • 1
    • 2
    Email author
  • Frédéric Jenny
    • 3
  • Aleksandra Khimich
    • 1
  1. 1.Toulouse School of EconomicsToulouse Cedex 6France
  2. 2.CEPRLondonUK
  3. 3.ESSEC Business SchoolParisFrance

Personalised recommendations