Determinants of Cartel Duration: A Cross-Sectional Study of Modern Private International Cartels

Abstract

This research identifies and measures factors that contribute to the variation in duration of private international cartels discovered between 1990 and July 2004. Duration is explained with a Cox proportional hazards model. The regression results demonstrate the significance of five categories of explanatory factors: market structure, internal cartel organization, industry-specific conditions, external macro-economic conditions, and antitrust law environment. The empirical results verify some previous findings, contradict some previous results, and confirm the significance of some novel factors. Consistent with previous cartel duration studies, industry concentration and market share have positive effects on cartel duration. Contrary to former findings, the present analysis exhibits a positive relationship between economic downturns and cartel duration. This suggests that since 1990 profit incentives during periods of downward economic pressure encourage the maintenance of cartel contracts. We find that several internal cartel characteristics have some statistical significance on cartel duration, such as the number of participating firms, overcharge percentage, cultural diversity, and bid-rigging conduct. Independent variables pertaining to antitrust law environment, unique to this study, add explanatory power in assessing cartel duration. A temporal analysis of 1990-2004 discovers that increased use of anti-trust leniency programs have had an increasingly significant negative impact on cartel duration.