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Calculating the damage of a cartel subject to transition periods: The international uranium cartel in the 1970s

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  • Lunde, Asger
  • Sandberg, Rickard
  • Söderberg, Magnus
Abstract
The theory about cartel pricing and descriptive price statistics suggests that the price path over a cartel life cycle can be subject to gradual, non-linear transitions where the price path moves from (to) the non-collusive to (from) the maximum collusive equilibrium. Ignoring such transitions can lead to biased estimates of the cartel and damage effects. Smooth transition regression (STR) models are a class of models well suited to capture such transitions, also under realistic conditions when the transition start and end dates are uncertain, and when the two transitions are asymmetric. We evaluate the international uranium cartel during the 1970s, using both the mainstream approach based on a linear specification with a dummy variable to capture the cartel, and an STR model. We are the first to use STR models in the evaluation of a cartel/damage effect. Using the STR model, we find that the damage effect is about 18 times higher as compared to the mainstream model.

Suggested Citation

  • Lunde, Asger & Sandberg, Rickard & Söderberg, Magnus, 2019. "Calculating the damage of a cartel subject to transition periods: The international uranium cartel in the 1970s," Energy Economics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:eneeco:v:84:y:2019:i:c:s0140988319302683
    DOI: 10.1016/j.eneco.2019.104487
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    Cited by:

    1. Correa-Giraldo, Manuel & Garcia-Rendon, John J. & Perez, Alex, 2021. "Strategic behaviors and transfer of wholesale costs to retail prices in the electricity market: Evidence from Colombia," Energy Economics, Elsevier, vol. 99(C).

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    More about this item

    Keywords

    Cartel; Damage; Transition; Uranium; Smooth transition regression models;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L72 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Other Nonrenewable Resources

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