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Department of Economics, Norwegian School of Economics (NHH) Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)

No 25/2012:
Anatomy of Cartel Contracts.

Ari Hyytinen (), Frode Steen () and Otto Toivanen ()

Abstract: We study cartel contracts using data on 18 contract clauses of 109 legal Finnish manufacturing cartels. One third of the clauses relate to raising profits; the others deal with instability through incentive compatibility,cartel organization, or external threats. Cartels use three main approaches to raise profits: Price, market allocation, and specialization. These appear to be substitutes. Choosing one has implications on how cartels deal with instability. Simplifying, we find that large cartels agree on prices, cartels in homogenous goods industries allocate markets, and small cartels avoid competition through specialization.

Keywords: Cartels; contracts; antitrust; competition policy; industry heterogeneity.; (follow links to similar papers)

JEL-Codes: K12; L40; L41; (follow links to similar papers)

56 pages, December 31, 2012

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