Cartel Enforcement and Deterrence Over the Life of A Competition Authority

Abstract

This paper finds evidence of an inverse U shape in the number of cartels detected by a Competition Agency (CA) over its lifetime. We interpret this as evidence that, as the CA builds up experience in enforcement, this feeds back into the business community to deter future cartel formation. We present two simple theoretical models, focussing respectively on composition and frequency deterrence, to describe how the feedback would work. Empirically, we simulate the long-term dimension by applying cohort analysis on an international panel of CAs during the time period 2006-2014.

Keywords: cartels, cohort effects, competition policy evaluation, deterrence, detection

JEL Classification: K21, L44, H11