A Business Cartel 's Success Essay

1571 Words Dec 10th, 2016 7 Pages
Margaret Levenstein and Valerie Suslow seek out what determines a business cartel’s success. They reject the assumption of many economists that the main reason cartels fail comes from cheating firms, which undermine attempts by cartels to collude to raise prices and restrict output. They believe that cheating is just one facet of how a cartel can fail and not the main reason. To answer their question, Levenstein and Suslow attempt to answer four other research questions: 1. Can cartels succeed? 2. How long do cartels last? 3. What impact do cartels have? 4. What causes a cartel to break up or fail? Using a variety of quantitative evidence, Levenstein and Suslow use these questions to determine what aids in a cartels success. They contend that while many cartels fail, many do succeed, and their success stems from how they can collaborate, deter cheating, and bar entry by other firms.
Levenstein and Suslow admit that since cartels are usually secretive and illegal, their empirical evidence is limited and cannot be based on random samples. Most of the evidence is extracted from law enforcement prosecutors and governments that allow cartels to reside. They both agree that it is difficult to guess the success of cartels because of their secretiveness and ability to stay under the radar of regulatory agencies. However, Levenstien and Suslow pull a great deal of data from the cases they have and create a strong argument for how cartels succeed despite the limited amount of case…

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