What Determines Cartel Duration? Global Evidence Using Quantile Regression Analysis

Abstract The longevity of cartels has been a highly contested topic among economists and policymakers, with numerous researchers arguing that cartels are inherently unstable, and their endurance is usually short-lived. Understanding the main factors that influence cartel duration is essential from a managerial point of view let alone the competition policy perspective. The present paper employs quantile regression techniques thus allowing for a more thorough and precise depiction of the data in terms of estimations compared to the traditional OLS analysis. The empirical findings support that the number of cartelists imposes an asymmetric effect, reducing (increasing) the lifespan of collusion only in the short (long)-lived cartels. Operating internationally and having a third-party facilitator both lengthen cartels, but the magnitudes of these effects decline monotonically over the range of the distribution. Relative to price-fixing, bid-rigging lengthens cartels in the bottom 20% of the distribution but has no significant effect elsewhere. Finally, the institutional effect such as the prevalence of leniency programs appears to have no significant effect on cartel duration, except at the very bottom of the distribution where the effect is small in magnitude. The results survive robustness checks addressing endogeneity and reverse causality.