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Cartel birth and death dynamics: Empirical evidence

2023; Elsevier BV; Volume: 89; Linguagem: Inglês

10.1016/j.ijindorg.2023.102932

1873-7986

Tove Forsbacka, Chloé Le Coq, Catarina M. P. Marvão,

Corporate Finance and Governance

This paper examines how a gradual tightening of antitrust enforcement impacts cartels’ births and deaths. To avoid the inherent sample selection bias in prosecuted cartel studies, we use a unique dataset of Swedish legal cartels registered between 1946 and 1993. We compare estimates from a count model (considering only registered cartels) and a Hidden Markov Model (allowing for potentially unregistered cartels) to identify observed and hidden cartel dynamics. The count model suggests that strengthening antitrust enforcement has a deterrent effect, but the Hidden Markov Model suggests otherwise. Despite stricter competition laws and a credible threat of cartel prohibition, cartels continue to form, but do so undercover. Additionally, our results suggest that the strengthening of competition law has little impact on destabilizing existing cartels.