Despite a long-standing presumption on the part of most economists that cartels are fundamentally unstable, we find that, across many countries and historical periods, the average duration of cartels is between five and seven years. This conclusion draws on our overview of empirical regularities associated with cartels active in the 19th, 20th, and 21st centuries in the United States, Europe, and Japan, as well as international cartels.

“Our current research focuses on contemporary international cartels, with particular interest in the intersection of competition policy and trade policy.”

We examine the effects of cartels on prices and non-price competition, along with the determinants of cartel duration. We find considerable dispersion in cartel duration: a large number of cartels break down within a year or two, but there are many that endure, including a large fraction that last a decade or more.

Theoretical research on cartels over the last two decades has deepened our understanding of the possibilities for cartel success, but has not been able to make many generalizations or empirical predictions. Partly as a result, recent empirical research has focused on case studies of individual cartels. This paper is unique in synthesizing these case studies with cross-sectional evidence and relating it to theory, in order to provide general lessons and a direction for future research and competition policy.

Competition can be very intense and results in low profit margins. Firms respond to competition in a variety of ways, but, over the last hundred years, a large number have reacted by talking to their competitors in order to fix prices and artificially limit supply, in an effort to eliminate competition. In many cases, firms divide markets geographically and assign customers to particular suppliers.

Since many of these cartels are in raw materials and other intermediate goods, they can harm both the companies that buy from them and the final consumers that those companies sell to. We find that, although some of these cartels fall apart quickly, many do not, indicating that the potential for consumer harm is significant and that there is a necessary role for policy oversight.

We had each individually engaged in empirical research on cartels, analyzing case studies and cross-sections from different historical periods. We thought there would be much to learn in bringing together these different empirical methodologies.

Our current research focuses on contemporary international cartels, with particular interest in the intersection of competition policy and trade policy.

Our research suggests that there is an important role for effective competition policy in both well-established market economies and newly emerging market economies. Unimpeded, international cartels distort trade, harm consumers, and put new entrants—especially those from developing countries—at a disadvantage.