When Do Firms Leave Cartels? Determinants and the Impact on Cartel Survival

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 piecewise-constant exponential proportional hazard model with a particular focus on the impact of internal and external time-varying determinants, we find that firms show a higher probability to leave a cartel if prior exits occurred as well as in periods of high demand growth. However, we find a lower exit probability in situations of prior entries to the cartel or in periods of high interest rates. Additional estimations at the cartel level further suggest that firm exits increase the probability of a cartel breakdown substantially.

Hellwig, Michael and Kai Hüschelrath (2018), When Do Firms Leave Cartels? Determinants and the Impact on Cartel Survival, International Review of Law and Economics 54 , 68-84