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Competition Policy Evaluation through Damage Estimation in Fuel Retail Cartel

Simone Cuiabano

No 17-847, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: I estimate the fuel retailer cartel damages in the south of Brazil using reduced and structural forms for supply and demand. Brazilian Competition Authority (CADE) documents help to characterize the ethanol and gasoline retailers involved in the collusion. The objective is to evaluate competition policy by comparing the amount of estimated damages with the amount of applied fines. This paper also adds an important result to gasoline substitution, as data shows that ethanol is perceived as a perfect substitute and it is price inelastic. Results show an overcharge of 4.6% to 6.6% in the gasoline market and up to 12% in the ethanol market during collusion. Fines should consider the deterrence effect and, giving the low probability of detection, CADE’s applied fines seemed to be in line with this objective.

Date: 2017-09
New Economics Papers: this item is included in nep-com and nep-ene
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