Monday, April 9, 2012

12 April 2012: What Do Cartel Ringleaders Do? EC Cartels 1990-2008

Oindrila De
Indian Institute of Management, Indore

The concept of the ringleader within a cartel has specific legal relevance, especially concerning fines and leniency. While the economic theory of cartels rarely attributes any well defined meaning to the term ringleader, it does imply the sorts of roles that the ringleader might assume – facilitating information sharing and coordination, and helping to reconcile the potentially asymmetric incentives of cartel members by accommodating and/or enforcing. This paper uses a sample of 89 EC cartels to establish how far the roles of ringleaders identified by the competition authority can be interpreted as the means by which the cartels attempt to solve the ‘cartel problem(s). It employs two approaches. The first is based on close readings of the European Commission’s decision documents; the second is more indirect, entailing logit analysis which predicts whether there is a ringleader in any particular case in terms of the internal structure of the cartel. The main findings are that: only 1 in 5 cartels involves a ringleader; they only occur in cartels which fix price; and they are most likely in cartels which have more firms, who display larger size asymmetries. The latter result is consistent with collusion theory, in that problems of coordination and the necessity for potential enforcement are likely to be greatest where more firms are involved, especially where they are asymmetric.

One other interesting finding is that there appears to be two broad types of ringleader. In most cases, the ringleader has a potentially aggressive function – leading on price and/or punishing (or threatening to punish) deviation. But in some cases, its functions seem to be restricted to just the facilitating activities of organisation and managing information exchange. On the latter functions, there are sometimes alternative mechanisms used – rather than having a ringleader, the cartel is able to employ a trade association for this purpose.

Date: April 12, 2012
Time: 03:00 P.M.

AMEX Conference Room (Second Floor)
Department of Economics,
Delhi School of Economics,
New Delhi-110007(INDIA)


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