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10 - The Challenges of Cartelization with Many Products and Ongoing Technological Advancements

Liquid Crystal Displays Worldwide*

Published online by Cambridge University Press:  06 December 2024

By
Dennis Carlton ,
Mark Israel ,
Ian MacSwain  and
Allan Shampine
Edited by
Joseph E. Harrington Jr.  and
Maarten Pieter Schinkel
Joseph E. Harrington Jr.
Affiliation:
University of Pennsylvania
Maarten Pieter Schinkel
Affiliation:
Universiteit van Amsterdam
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Summary

  • ◦ The case study of the liquid crystal display (LCD) cartel underscores the strong incentives that arise in an oligopoly to limit competition but also the practical difficulties in doing so when there are many products and varieties involved.

  • ◦ The breadth of the cartel is impressive in that it encompassed all uses of LCD panels and did so for at least a decade. It is partly that breadth that posed a challenge for there were hundreds of different products and a dozen manufacturers. Rather than trying to coordinate the prices of the entire product line, the cartel focused only on the highest selling products, and at a degree of aggregation which did not fully take account of quality differences.

  • ◦ The lack of collusion over all products’ prices could result in less effective collusion which the case study finds as the estimated overcharge is no higher than 2 percent. But even a 2 percent overcharge would have resulted in incremental revenues to the conspirators exceeding $3 billion. The takeaway is that even a highly imprecise collusive arrangement can be profitable to firms and harmful to buyers.

Keywords

LCD screensprice fixingmulti-product firmsovercharge
Type
Chapter
Information
Cartels Diagnosed
New Insights on Collusion
 , pp. 272 - 316
Publisher: Cambridge University Press
Print publication year: 2025

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