When do firms leave cartels? Determinants and the impact on cartel survival

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URL:	https://ub-madoc.bib.uni-mannheim.de/41886
URN:	urn:nbn:de:bsz:180-madoc-418869
Document Type:	Working paper
Year of publication:	2017
The title of a journal, publication series:	ZEW Discussion Papers
Volume:	17-002
Place of publication:	Mannheim
Publication language:	English
Institution:	Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series:	Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject:	330 Economics
Classification:	JEL: C41 , K21 , L41,
Keywords (English):	Survival Analysis , cartels , duration , European Union
Abstract:	We use a dataset of 615 firms which participated in 114 illegal cartels – convicted by the European Commission between 1999 and 2016 – to investigate the determinants of the duration of a firm’s participation in a cartel. Applying a Weibull proportional hazard model with a particular focus on the impact of internal and external time-varying determinants, we find that firms show an increased probability to leave a cartel if prior exits occurred as well as in periods of high demand growth. However, we find a reduced exit probability in situations of prior entries to the cartel or in periods of high interest rates. Additional estimations on the cartel level further suggest that firm exits increase the probability of a cartel breakdown substantially.