Cartel Duration and Endogenous Private Monitoring and Communication: An Instrumental Variables Approach

Zhou, Jun (April 2012): Cartel Duration and Endogenous Private Monitoring and Communication: An Instrumental Variables Approach. SFB/TR 15 Discussion Paper No. 369

Abstract

Colluding firms often exchange private information and make transfers within the cartels based on the information. Estimating the impact of such collusive practices— known as the “lysine strategy profile (LSP)”— on cartel duration is difficult because of endogeneity and omitted variable bias. I use firms’ linguistic differences as an instrumental variable for the LSP in 135 cartels discovered by the European Commission since 1980. The incidence of the LSP is not significantly related to cartel duration. After correction for selectivity in the decision to use the LSP, statistical tests are consistent with a theoretic prediction that the LSP increases cartel duration.

• Item Type: Paper (Discussion Paper)
• Keywords: the lysine strategy profile, post-agreement information exchange, within-cartel transfers, monitoring, verification and promotion of compliance, cartel duration, endogenous covariates
• Collections: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A5 - Unvollständige Vertragsbeziehungen und die Gestaltung von Residualrechten
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: D43, K21, K42, L13
• Language: English