Operation Of Cartels Research Articles

Contemporary narcoterrorism in Latin America. A case of Colombia and Mexico

At the end of the Cold War, the term "narcoterrorism" was coined. This concept originally meant ties between drug dealers and terrorist organizations and the countries of the Soviet bloc. The definition of this phenomenon, developed later, is ambiguous and means both methods attributed to terrorists, applied by drug cartels and the financing of their activities by terrorist groups through drug trafficking. This article deals with the first of these meanings and discusses the situation in two Latin American countries. The Colombian Medellin cartel was the first to use typical terrorist measures. Criminals carried out bomb attacks on public buildings, planes and attacks on politicians. In doing so, they wanted to achieve the goal of preventing the extradition of cartel leaders. Mass drug production has been going on since the 1930s in Mexico, but at the turn of 21st century, local criminal groups monopolized drug trafficking routes to the US. In 2006, an attempt by the state to combat this practice resulted in a long-term "drug war", in which several hundred thousand people were killed. There has also been an unprecedented increase in crime in the world, to the point where about 100 people are killed at the hands of the cartels in Mexico on a daily basis. The international community has almost unanimously labeled the activities of the Mexican drug cartels as terrorism. Only the opinion expressed in Mexican literature differed in that respect. The cooperation of these cartels with terrorist organizations turned out to constitute another threat to international security. This kind of cooperation can bring mutual benefits to terrorist groups and the countries supporting them – especially in the case of money laundering. The long-term operation of cartels has created the phenomenon of "drug culture" in Latin American communities, glorifying the terrorist activities of cartels and the figures of their leaders.

CARTEL OVERCHARGES AND THE DETERRENT EFFECT OF EU COMPETITION LAW

This article examines cartel overcharges for the European market. Using a sample of 191 overcharge estimates and several parametric and semiparametric estimation procedures, the impact of different cartel characteristics and the market environment on the magnitude of overcharges is analyzed. The mean and median overcharge rates are found to be 20.70 percent and 18.37 percent of the selling price and the average cartel duration is 8.35 years. Certain cartel characteristics and the geographic region of cartel operation influence the level of overcharges considerably. Furthermore, empirical evidence reveals that from an ex-post perspective the currently existing fine level of the EU Guidelines is insufficient for optimal cartel deterrence, suggesting further adjustments.

Cartel Organization, Price Discrimination and the Trans-Atlantic Passage, 1899-1911

This paper studies the operation of trans-Atlantic passenger shipping cartels during the period 1899-1911 and its effects on passenger traffic. We systematically document and categorize cartel agreements on the basis of key aspects of internal organization. Then, we exploit the variation in internal organization across markets and over time to investigate whether any specific organizational aspects were more effective in reducing flows from competitive levels. We find some evidence that the assessment of fines for violations of the agreement enhanced collusion, but no evidence that the posting of bonds (to guarantee the fines) or the formation of pooling arrangements had any incremental effect. We also take advantage of the richness of the data on passenger flows to show that collusion had a smaller effect on first and second-class passenger flows relative to third class service. Finally, we provide estimates of consumer substitution across passenger classes due to collusion and show that such substitution was small but non-negligible, especially during periods of normal cartel operation. Our study has broader implications for the theory of collusion, and on how collusion affects the quality, rather than the quantity, of products purchased by consumers.

Cartel Overcharges and the Deterrent Effect of EU Competition Law

This paper examines cartel overcharges for the European market. Using a sample of 191 overcharge estimates and several parametric and semi-parametric estimation procedures, the impact of different cartel characteristics and the market environment on the magnitude of overcharges is analyzed. The mean and median overcharge rates are found to be 20.70 percent and 18.37 percent of the selling price and the average cartel duration is 8.35 years. Certain cartel characteristics and the geographic region of cartel operation influence the level of overcharges considerably. Furthermore, empirical evidence suggests that the currently existing fine level of the EU Guidelines is too low to achieve optimal deterrence.

Powstawanie i stabilność karteli heterogenicznych

The article focuses on the emergence and operation of cartels in sectors in which companies differ in terms of production costs. The author shows that stable cartels can operate in sectors made up of enterprises that are heterogeneous in terms of costs and based on price leadership. However, when it comes to the cartel formation process, there is a distinct difference between homogeneous and heterogeneous sectors. While the formation of a cartel in the case of homogenous firms may be difficult due to the 'free-rider' problem, the author notes, in the case of heterogeneous companies no such obstacles exist and it can be expected that the process of creating a stable cartel will end in success. The analysis was made using the author's own model of the cartel formation process in the form of a single-period non-cooperative game with simultaneous decisions made by participants. To investigate the behavior of enterprises in the formation and operation of cartels, the Nash equilibrium concept was used. On the basis of the results obtained, it can be concluded that in the case of a sector with heterogeneous enterprises, the role of antitrust offices significantly increased in comparison to markets with homogenous firms. The theoretical analysis made by the author is illustrated with a case study for a district heating pipe cartel.

Passenger Shipping Cartels and Their Effect on Trans-Atlantic Migration

We investigate the impact of passenger shipping cartels on trans-Atlantic migration during the early twentieth century. We assemble from primary sources a detailed database of passenger flows and cartel operations and show that cartel operation reduced migratory flows by approximately 20% to 25%. Further, we show that there was no strong intertemporal substitution in migration to North America (at least in the short run) and, therefore, that the effects of cartel operation were not “undone” by later migration. Lastly, we find that cartel operation had no appreciable effect on the variability of migration flows, providing evidence against the notion that unfettered competition was destabilizing to turn-of-the-century transportation markets.

Cartel Stability: An Empirical Analysis

Using the data on 238 cartelized markets we evaluate econometrically the impact of cartel characteristics as well the market and legal environment of cartel operation on cartel stability. The latter is measured as the expected number of repeated attempts to form a cartel in the same product market. We analyze the behavior of guilty (sanctioned) cartels relative to legal cartels. We find that global cartels are less stable than local cartels. Cartels operating in the countries with developed antitrust law are more stable than cartels operating in the countries without similar regulation. As antitrust law regimes become stricter, sanctioned cartels become less stable. If the average duration of cartel episode is relatively short, the cartel is more likely to make another attempt to collude. If a cartel manages to impose a relatively high level of overcharge, the cartel is less likely to repeat collusive conduct.

Consumer Decision-Making Styles and the Purchase of Financial Services

This article seeks to augment our understanding of consumers' attitudes and motivations when purchasing financial products. Using insights gleaned from focus discussion groups and a quantitative survey of consumers it focuses upon understanding the extent to which consumers' attitudes and behaviour differs for a range of financial products. Within the traditional structure and operation of the financial services industry consumers appear to express little choice. The rigid structure of the industry, coupled with the operation of cartels, meant that consumers had to accept the form and price of financial products and delivery channels. However the critical impact of deregulation and the emergence of new forms of technology have altered this situation by producing a highly competitive market for financial services. Consumers thus appear more disposed to change their attitudes when purchasing financial services. The outcome of these changes is that financial providers are now less certain of retaining their profitable customers or of cross selling high value products (such as personal pensions and investment products). It is, therefore, imperative that financial service providers better understand their customers' attitudes in an attempt to influence consumer decision making styles when purchasing financial products. This article accordingly seeks to analyse and understand more fully consumers' decision making styles for a range of financial products, including current accounts, insurance products, credit products and investment products. In the conclusion an assessment is made of the findings and the broad strategic implications for financial providers are examined.