Cartel birth and death dynamics: Empirical evidence

• •We examine the population of Swedish legal cartels registered in 1946–1993.•We identify observed (registered) and hidden cartel dynamics.•Antitrust enforcement changes are key in determining cartel births and deaths.•Strengthening antitrust law can deter cartels but does not always destabilize them.•When the law becomes particularly strict, cartels still form but do so undercover. 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.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

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