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Recurrent Collusion: Cartel Episodes and Overcharges in the South African Cement Market

Authors
  • Boshoff, Willem H.1
  • van Jaarsveld, Rossouw1
  • 1 Stellenbosch University, Department of Economics, Centre for Competition Law and Economics, Private Bag X1, Matieland, 7602, South Africa , Matieland (South Africa)
Type
Published Article
Journal
Review of Industrial Organization
Publisher
Springer US
Publication Date
Jun 06, 2018
Volume
54
Issue
2
Pages
353–380
Identifiers
DOI: 10.1007/s11151-018-9637-9
Source
Springer Nature
Keywords
License
Yellow

Abstract

Cartel cases may involve recurrent collusion, with cartel periods interspersed by periods of greater competition. An empirical model of recurrent collusion must account for different data generating processes during collusive and non-collusive episodes and allow for the dating of such episodes. It should also allow for the possibility of flexible transitions between collusive and non-collusive episodes. This paper proposes a Markov regime-switching model to detect recurrent periods of collusive damages and to estimate cartel effectiveness in any given time period. We use this information to estimate overcharges, which we show are much higher than those suggested by conventional approaches.

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