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Cartel overcharges

The author is Professor Emeritus at Purdue University, West Lafayette, IN. He is indebted to Professor Robert H. Lande, who worked with the author on earlier law review articles on cartel overcharges; he also was responsible for locating several overcharges from antitrust verdicts in U.S. courts and provided meticulous comments on this version.

The Law and Economics of Class Actions

ISBN: 978-1-78350-951-5, eISBN: 978-1-78350-952-2

ISSN: 0193-5895

Publication date: 18 March 2014

Abstract

Many jurisdictions fine illegal cartels using penalty guidelines that presume an arbitrary 10% overcharge. This article surveys more than 700 published economic studies and judicial decisions that contain 2,041 quantitative estimates of overcharges of hard-core cartels. The primary findings are: (1) the median average long-run overcharge for all types of cartels over all time periods is 23.0%; (2) the mean average is at least 49%; (3) overcharges reached their zenith in 1891–1945 and have trended downward ever since; (4) 6% of the cartel episodes are zero; (5) median overcharges of international-membership cartels are 38% higher than those of domestic cartels; (6) convicted cartels are on average 19% more effective at raising prices as unpunished cartels; (7) bid-rigging conduct displays 25% lower markups than price-fixing cartels; (8) contemporary cartels targeted by class actions have higher overcharges; and (9) when cartels operate at peak effectiveness, price changes are 60–80% higher than the whole episode. Historical penalty guidelines aimed at optimally deterring cartels are likely to be too low.

Keywords

Acknowledgements

Acknowledgments

Anonymous reviewers of RLE, John Kwoka, and numerous comments on two previously posted working papers resulted in a large number of constructive suggestions, for which I am grateful. My students Jeff Zimmerman, David Ubilava, and Yuliya Bolotova assisted in coding early versions of the Master Data spreadsheet summarizing these data. Numerous users of this spreadsheet have provided corrections and additions.

Citation

Connor, J.M. (2014), "Cartel overcharges

The author is Professor Emeritus at Purdue University, West Lafayette, IN. He is indebted to Professor Robert H. Lande, who worked with the author on earlier law review articles on cartel overcharges; he also was responsible for locating several overcharges from antitrust verdicts in U.S. courts and provided meticulous comments on this version.

", The Law and Economics of Class Actions (Research in Law and Economics, Vol. 26), Emerald Group Publishing Limited, Bingley, pp. 249-387. https://doi.org/10.1108/S0193-589520140000026008

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Emerald Group Publishing Limited

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