Estimating the Price Overcharge from Cartelisation of the Irish Automobile Industry

Abstract

Price coordination can be very harmful for consumers. Yet, even if a cartel is proved to exist, and successful in enforcement, how do we estimate damages or price overcharges to consumers? We build a structural model of the Irish automobile market that avails of a crosssection of new cars and jointly estimate demand and cost primitives. We use these estimates to quantify the role that price coordination could play in terms of pricing, profits and burden of taxation in three alternative regimes: All models of cars compete in price (Regime I); Only cars of different manufacturers compete in price (Regime II); Only cars of different importers compete in price (Regime III).