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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

In: The Law and Economics of Class Actions

Author

Listed:
  • John M. Connor
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) themedianaverage long-run overcharge for all types of cartels over all time periods is 23.0%; (2) themeanaverage 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.

Suggested Citation

  • John M. Connor, 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 ," Research in Law and Economics, in: The Law and Economics of Class Actions, volume 26, pages 249-387, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rlwezz:s0193-589520140000026008
    DOI: 10.1108/S0193-589520140000026008
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    More about this item

    Keywords

    Cartel; collusion; price fixing; overcharge; antitrust; optimal deterrence; L12; L42; K22; B14; F29;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • B14 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Socialist; Marxist
    • F29 - International Economics - - International Factor Movements and International Business - - - Other

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