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Book part
Publication date: 6 April 2007

Price-fixing Overcharges: Legal and Economic Evidence

John M. Connor

This paper surveys published economic studies and judicial decisions that contain 1,040 quantitative estimates of overcharges of hard-core cartels. The primary finding is…

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Abstract

This paper surveys published economic studies and judicial decisions that contain 1,040 quantitative estimates of overcharges of hard-core cartels. The primary finding is that the median long-run overcharge for all types of cartels over all time periods is 25.0%:18.8% for domestic cartels and 31.0% for international cartels. Cartel overcharges are positively skewed, pushing the mean overcharge for all successful cartels to 43.4%. Convicted cartels are on average as equally effective at raising prices as unpunished cartels, but bid-rigging conduct does display somewhat lower mark-ups than price-fixing cartels. These findings suggest that optimal deterrence requires that monetary penalties ought to be increased.

Details

Research in Law and Economics
Type: Book
DOI: https://doi.org/10.1016/S0193-5895(06)22004-9
ISBN: 978-0-7623-1348-8

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Book part
Publication date: 18 March 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.

John M. Connor

Many jurisdictions fine illegal cartels using penalty guidelines that presume an arbitrary 10% overcharge. This article surveys more than 700 published economic studies…

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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.

Details

The Law and Economics of Class Actions
Type: Book
DOI: https://doi.org/10.1108/S0193-589520140000026008
ISBN: 978-1-78350-951-5

Keywords

  • Cartel
  • collusion
  • price fixing
  • overcharge
  • antitrust
  • optimal deterrence
  • L12
  • L42
  • K22
  • B14
  • F29

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Book part
Publication date: 29 August 2018

When Is the “Kennedy Correction” Appropriate in Estimating Overcharges?

Wenqing Li and James F. Nieberding

In regressions using a semi-logarithmic functional form that include a dummy variable, Kennedy (1981) showed that instead of interpreting the dummy coefficient directly…

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Abstract

In regressions using a semi-logarithmic functional form that include a dummy variable, Kennedy (1981) showed that instead of interpreting the dummy coefficient directly, one needs to “correct” it to estimate the percentage effect of the dummy variable on the dependent variable. In the context of an antitrust application, we show that when using a dummy variable to estimate the overcharge as a percentage of the actual price, one should not apply the correction proposed by Kennedy because doing so will lead to an overcharge estimate with a larger bias.

Details

Healthcare Antitrust, Settlements, and the Federal Trade Commission
Type: Book
DOI: https://doi.org/10.1108/S0193-589520180000028009
ISBN: 978-1-78756-599-9

Keywords

  • Dummy variable
  • overcharge
  • antitrust
  • bias
  • reduced-form
  • collusion
  • price-fixing
  • C22
  • K21
  • L4

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Article
Publication date: 1 December 1998

Pricing accuracy at grocery stores and other retail stores using scanners

Guy Richard Clodfelter

In recent years there have been many inquiries and studies by government agencies, media reporters, and academic institutions about pricing accuracy at retail stores that…

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Abstract

In recent years there have been many inquiries and studies by government agencies, media reporters, and academic institutions about pricing accuracy at retail stores that use scanners. Some of these reports have even accused retailers of using scanners to intentionally overcharge customers. This study is based on checking 146,518 items in over 2,000 stores in nine states. Analysis of these data found a price accuracy rate of 96.13 per cent with undercharges occurring more frequently than overcharges. In addition, there was a statistically significant difference between pricing accuracy at grocery stores and other retail stores. Grocery stores recorded a higher accuracy level. There is still room for improvement. Only 58 per cent of the stores inspected reached a 98 per cent pricing accuracy standard recommended by the National Conference of Weights and Measures.

Details

International Journal of Retail & Distribution Management, vol. 26 no. 11
Type: Research Article
DOI: https://doi.org/10.1108/09590559810246368
ISSN: 0959-0552

Keywords

  • Charging
  • Pricing
  • Retailing
  • Scanners
  • Stores

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Book part
Publication date: 8 October 2018

Occupational Status, Impression Formation, and Criminal Sanctioning: A Vignette Experiment

Amy Kroska and Marshall R. Schmidt

We examine the effect of an offender’s occupational status on criminal sentencing recommendations using a vignette experiment that crosses the offender’s occupational…

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Abstract

Purpose

We examine the effect of an offender’s occupational status on criminal sentencing recommendations using a vignette experiment that crosses the offender’s occupational status (white-collar vs blue- or pink-collar) and the crime label, with one label (overcharging) associated with white-collar offenders and the other (robbery) associated with lower-status offenders. We expect negative and potent post-crime impressions of the offender and the crime to increase perceptions of criminality and, in turn, the recommended sentence. We term these negative and potent impressions “criminality scores.” Drawing on affect control theory (ACT) impression formation equations, we generate criminality scores for the offenders and the crimes in each condition and, using those scores as a guide, predict that white-collar offenders and offenders described as “robbing” will receive a higher recommended sentence. We also expect eight perceptual factors central to theories of judicial sentencing mediate these relationships.

Methodology

We test these hypotheses with a vignette experiment, administered to female university students, that varies a male offender’s occupation and the word used to describe his crime.

Findings

Consistent with our ACT-derived predictions, white-collar offenders and offenders described as robbing received a higher recommended sentence. But, contrary to predictions, only one perceptual factor, crime seriousness, mediated these effects, and the mediation was partial.

Research Implications

Our findings suggest the perpetrator’s post-crime appearance of negativity and power offer a valuable supplement to theories of judicial sentencing.

Originality

This study is the first to test the hypothesis that sentencing disparities may be due to the way the perpetrators’ sociodemographic attributes shape their post-crime appearance of negativity and power.

Details

Advances in Group Processes
Type: Book
DOI: https://doi.org/10.1108/S0882-614520180000035005
ISBN: 978-1-78769-013-4

Keywords

  • Affect control theory
  • criminal sanctioning
  • impression formation
  • judicial sentencing; occupational status; vignette experiment

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Article
Publication date: 1 June 2004

An examination of pricing accuracy at retail stores that use scanners

Richard Clodfelter

This study examined the pricing accuracy at retail stores using scanners. Reports from weights and measures inspectors in nine states were analyzed over a four‐year…

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Abstract

This study examined the pricing accuracy at retail stores using scanners. Reports from weights and measures inspectors in nine states were analyzed over a four‐year period. Findings are reported on the number of pricing errors, the number and percentage of overcharges, and the number and percentage of undercharges. The results revealed an error rate of 3.86 percent. Undercharges represented 2.21 percent of the total errors, while overcharges represented 1.65 percent. In addition, the research found that error rates declined over the four‐year period. The implications of these findings for retailers and consumers are discussed.

Details

Journal of Product & Brand Management, vol. 13 no. 4
Type: Research Article
DOI: https://doi.org/10.1108/10610420410546970
ISSN: 1061-0421

Keywords

  • Pricing
  • Accuracy
  • Retailers

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Book part
Publication date: 1 April 2007

Effectiveness of Antitrust Sanctions on Modern International Cartels

John M. Connor

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The Political Economy of Antitrust
Type: Book
DOI: https://doi.org/10.1016/S0573-8555(06)82007-9
ISBN: 978-0-44453-093-6

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Article
Publication date: 2 August 2013

Unobservable service quality and moral hazard: the case of impartial business valuations

Jörg Prokop

The purpose of this paper is to discuss agency relationships occurring in an impartial business valuation setting. In particular, it shows how monitoring and sanctioning…

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Abstract

Purpose

The purpose of this paper is to discuss agency relationships occurring in an impartial business valuation setting. In particular, it shows how monitoring and sanctioning mechanisms, reputational concerns, and competition may affect the quality of valuation services rendered.

Design/methodology/approach

The paper reviews findings from auditing research and from the economic theory on credence goods, and applies them to an impartial business valuation setting.

Findings

Impartial valuation experts face incentives to either overwork, or underwork and overcharge their client. Which type of moral hazard is more likely to occur depends on the degree of competition among the agents. While market concentration gives rise to overworking, competition promotes underworking and overcharging. Due to regulatory differences, this effect is more pronounced in the valuation services market than in the auditing industry.

Research limitations/implications

The results imply that a client may be able to infer how to set up an effective monitoring and sanctioning system from the degree of competition among the impartial valuation experts. Future research should empirically validate the theoretical findings, and explore the relationship between service quality and internal governance structures of business valuation firms.

Practical implications

The results underline the necessity of an effective valuation quality assurance system set up by the client. They are thus relevant for clients, but also for regulatory bodies seeking to ensure the integrity of the valuation services market, and for valuation service providers striving to improve their corporate governance system.

Originality/value

The paper offers a new perspective on the reliability of business values determined by impartial experts. It emphasises the potential influence of the experts' competitive environment on service quality, and it shows how to design an effective valuation quality assurance system.

Details

Qualitative Research in Financial Markets, vol. 5 no. 2
Type: Research Article
DOI: https://doi.org/10.1108/QRFM-08-2011-0022
ISSN: 1755-4179

Keywords

  • Business valuation
  • Competition
  • Credence good
  • Moral hazard
  • Reputation
  • Asset valuation
  • Competitive strategy

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Article
Publication date: 9 September 2019

Customers’ behavioral responses to unfavorable pricing errors: the role of perceived deception, dissatisfaction and price consciousness

Siddik Bozkurt and David Gligor

Although unfavorable pricing errors (UPEs) cost customers billions of dollars each year, research has not yet examined customers’ reactions to UPEs. This paper aims to…

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Abstract

Purpose

Although unfavorable pricing errors (UPEs) cost customers billions of dollars each year, research has not yet examined customers’ reactions to UPEs. This paper aims to fill this gap by examining customers’ reactions to UPEs in terms of frequency, magnitude and the interaction between frequency and magnitude. Also, this study explores the moderated mediating role of price consciousness.

Design/methodology/approach

Three experimental studies were conducted to examine customers’ reactions to UPEs in terms of frequency, magnitude and the interaction between frequency and magnitude. PROCESS Model 6 and 84 along with multivariate regression analysis and MANOVA were used to test the hypotheses.

Findings

The results show that high-frequency and high-magnitude UPEs lead to increased perceived deception and dissatisfaction, resulting in a higher negative attitude toward the grocery store, decreased re-patronage intentions and increased negative word-of-mouth (NWOM). Also, results show that regardless of customers’ price consciousness level, customers display negative reactions when encountering UPEs.

Research limitations/implications

This paper only investigates UPEs in the brick and mortar setting; future studies should examine UPEs in different settings.

Practical implications

The findings show that UPEs can cause significant problems for grocery stores. Thus, managers should take precautionary measures (e.g. constantly checking shelves) to ensure that the advertised price and the checkout price match.

Originality/value

This paper represents the first attempt to empirically examine the relationship between UPEs frequency and magnitude, on the one hand, and perceived deception, dissatisfaction, customer attitude, re-patronage intentions, NWOM and price consciousness on the other.

Details

Journal of Consumer Marketing, vol. 36 no. 6
Type: Research Article
DOI: https://doi.org/10.1108/JCM-06-2018-2726
ISSN: 0736-3761

Keywords

  • Dissatisfaction
  • Moderated mediation
  • Price consciousness
  • Grocery store
  • Perceived deception
  • Unfavourable pricing errors

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Article
Publication date: 1 October 2004

The lease audit clause: Is it fair for tenants?

Edward Harris

Highly restrictive commercial lease audit clauses have come into vogue in commercial leases over the past decade or so. Their original purpose was to provide a means by…

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Highly restrictive commercial lease audit clauses have come into vogue in commercial leases over the past decade or so. Their original purpose was to provide a means by which the tenant could verify that the landlord’s accounting was reasonable and proper. The reason for its popularity with landlords is that it has evolved into a tool that allows landlords to capture funds in excess of the agreed‐upon deal based on the intent of a lease contract. Audit clauses typically relate to operating expense statements ‐ sometimes referred to as either OPE (operating expense) or CAM (common area maintenance) statements. Audit clauses have also been used, but with less frequency, by landlords for other billing categories, including electricity surveys and other tenancy‐related charges. Landlords have a fiduciary responsibility to bill their tenants properly. There should be full disclosure and transparency of the detail relating to a landlord’s calculations behind any and all bills rendered to a tenant. Lease audit clauses that limit tenant rights to transparency in a landlord’s billing system should not be allowable. Lease audit clauses are viewed by savvy end‐user tenants as a landlord’s ‘licence to steal’. Time‐limited lease audit clauses motivate landlords to overcharge their tenants: once the audit time limits have passed, the landlord may capture improper payments made by trusting and unsuspecting tenants. The audit clause is generally unfair to a tenant and as such should not be allowed in leases. If one must be present in a commercial lease, then it should at least be tied to a reasonable time frame ‐ such as the local jurisdiction’s statute of limitation, or a minimum of three years. Whether or not an audit clause exists in a lease, a tenant should make every effort to have a specialist lease audit firm review the lease and billings regularly to ensure compliance with specific lease language.

Details

Journal of Corporate Real Estate, vol. 6 no. 4
Type: Research Article
DOI: https://doi.org/10.1108/14630010410812414
ISSN: 1463-001X

Keywords

  • Lease audit
  • Rent audit
  • Electric audit
  • Commercial tenant services
  • Lease audit clause

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