No 108 Effects of Different Cartel Policies: Evidence from the German Power-Cable Industry Hans-Theo Normann, Elaine S.Tan September 2013 IMPRINT DICE DISCUSSION PAPER Published by düsseldorf university press (dup) on behalf of Heinrich‐Heine‐Universität Düsseldorf, Faculty of Economics, Düsseldorf Institute for Competition Economics (DICE), Universitätsstraße 1, 40225 Düsseldorf, Germany www.dice.hhu.de Editor: Prof. Dr. Hans‐Theo Normann Düsseldorf Institute for Competition Economics (DICE) Phone: +49(0) 211‐81‐15125, e‐mail:
[email protected] DICE DISCUSSION PAPER All rights reserved. Düsseldorf, Germany, 2013 ISSN 2190‐9938 (online) – ISBN 978‐3‐86304‐107‐6 The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors’ own opinions and do not necessarily reflect those of the editor. Effects of Different Cartel Policies: Evidence from the German Power-Cable Industry∗ Hans-Theo Normann Duesseldorf Institute for Competition Economics (DICE) Heinreich-Heine University Duesseldorf
[email protected] Elaine S. Tan Department of Economics, Royal Holloway, University of London
[email protected] September 2013 Abstract We analyze the effects of cartel policies on firm behavior using data from the German power- cable cartel. Antitrust authorities affected the cartel under two different legal regimes: penaliz- ing the cartel in some years, and exempting it for ten years from the general cartel prohibition. While penalties did not reduce prices or profits, making collusion legal raised profits by at least 16% each year, compared to the time when the illegal cartel was not prosecuted. The threat of penalties was sufficient to reduce profit from collusion.