‘Transition from Explicit to Tacit Collusion and the Bias in Cartel Damage Estimates’
November 7, 2014 Leave a comment
We’re into November but still plenty more insightful seminars on competition policy await us this Autumn. We continue the series this week with our very own Carsten Crede (CCP & ECO), presenting his research on ‘Transition from Explicit to Tacit Collusion and the Bias in Cartel Damage Estimates‘. Carsten is a PhD researcher at the UEA School of Economics and his research interests include industrial organisation and applied econometrics. An abstract for his presentation can be found below.
We explore the determinants of the incidence and magnitude of post-cartel tacit collusion. In a market experiment we allow periods of explicit communication under different competitive regimes followed by periods of no-communication, in which tacit agreements may take place. In the communication phase, we separately employ fines with and without leniency, firms’ ability to use targeted punishment, and experience of prior non-communication market contact. Even though there are differences in the magnitude, we find that the incidence of post-cartel tacit collusion is a robust common phenomenon across treatments. Moreover, the magnitude of tacit collusion is determined specifically by preceding success of formation and stability of explicit cartels. This indicates that the standard methods of estimating cartel damages may have a downward bias as they do not consider the damages caused by the post cartel tacit collusion. Overcharge estimations show that this bias increases with preceding cartel success. Finally, since it is possible from the results to rank different competitive regimes in terms of the formation and stability of successful explicit cartel, this study can also provide prescriptions regarding minimizing such overall damages.
The seminar takes place from 13:00-14:00 on Friday 7th November in the Thomas Paine Study Centre, Room 1.03.