Microeconomics Automotive Bearings Cartel Case Study Answers

In the spring of 2014, the EU Commission found that a number of European and non-European companies had formed a cartel in the market for automotive bearings. The Commissioned the cartel participants for an amount of € 953 million. In this case you are expected provide an economic analysis of cartels and of the remedies that authorities can impose when they discover cartels. Among others, you are expected to discuss the following issues:

  1. With reference to the case study-CASE COMP/39922 –
  2. BEARINGS carefully identify the market structure in which the automotive bearings companies operate.
  3. What proof is provided in the case of collusive behaviour? More generally what are the symptoms and tests of collusive behaviour?
  4. In the market structure discussed above under 1, what conditions make it possible for dominant firms to collude? Is collusion cheat proof? Base your answer o.a. on insights from game theory.
  5. Discuss the incentive(s) of the companies to participate in the cartel.
  6. Assess the welfare consequences of the companies' decision to involve in the cartel. Use graphs where possible and appropriate.
  7. Find the direct and indirect costs and benefits of government regulation as applied through competition policy.
  8. What conclusions can you draw about the Commission's decision to impose fines on the cartel participants? Explain why you think it is a good or bad decision. If you believe the fine is an appropriate measure, has it been calculated high/low enough?
  9. Writing style/Referencing (APA)/format requirements

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