MODELING THE BIRTH AND DEATH OF CARTELS WITH AN APPLICATION TO EVALUATING COMPETITION POLICY | Zendy

Harrington Joseph E. | Zendy; Chang MyongHun | Zendy

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MODELING THE BIRTH AND DEATH OF CARTELS WITH AN APPLICATION TO EVALUATING COMPETITION POLICY

Author(s) -

Harrington Joseph E.,

Chang MyongHun

Publication year - 2009

Publication title -

journal of the european economic association

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 7.792

H-Index - 93

eISSN - 1542-4774

pISSN - 1542-4766

DOI - 10.1162/jeea.2009.7.6.1400

Subject(s) - competition (biology) , state (computer science) , competition policy , economics , political science , law and economics , law , computer science , ecology , biology , algorithm , welfare

One of the primary challenges to measuring the impact of antitrust or competition policy on collusion is that the cartel population is unobservable; we observe only the population of discovered cartels. To address this challenge, a model of cartel creation and dissolution is developed to endogenously derive the populations of cartels and discovered cartels. With this theory, one can infer the impact of competition policy on the population of cartels by measuring its impact on the population of discovered cartels. In particular, changes in the duration of discovered cartels can be informative in assessing whether a new policy is reducing the latent rate of cartels. (JEL: L13, L41)

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