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

Jun Zhou

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

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.

Keywords: the lysine strategy profile; post-agreement information exchange; within-cartel transfers; monitoring; verification and promotion of compliance; cartel duration; endogenous covariates (search for similar items in EconPapers)
JEL-codes: D43 K21 K42 L13 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (5)

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