Estimating Vitamin Cartel’s Overcharges : A Time-Series Approach

An important issue in estimating cartel overcharges is to have a reliable estimate of the but-for-the-cartel price. While the cartel price is observable, the but-for-the-cartel price is not. A construction of the but-for-cartel-price evolution by assuming perfect competition, i.e. that price equals marginal cost plus a small margin is a non-starter in markets with product-differentiation and firms which may be vertically integrated, having significant and diverse fixed costs etc. Alternative possible approaches are based on prices or costs in countries or regions where product is not cartelised or during a previous non-cartelised period or constructs on cost-based data and mark-ups the but-for-price over the cartel period. This paper estimates, on the basis of data on a long period of monthly unit value data derived from intra-EU import trade of 6 major vitamins, and by using methods of applied econometric Time Series analysis, the relevant but-for-cartel-prices of 6 volume vitamins and thus the overcharges imposed by the Vitamins Cartel in EU