Peering through the haze: detecting cartel signs in Brazil's LPG resale market

Abstract

Objective: the aim of this article was to detect economic signs of cartel in the resale of LPG in the Brazilian cities of Campina Grande-PB, Caruaru-PE, Jaboatão dos Guararapes-PE, and Recife-PE; the first market condemned by the Administrative Council for Economic Defense (Cade). Method: we used a filter suggested in Bolotova, Connor and Miller (2008) that consists of estimating an ARCH model and its generalization, a Generalized Autoregressive Conditional Heteroskedasticity (GARCH), to test the hypothesis that, during the cartel period, the average price is higher and its variance lower.Conclusions: we showed that the average LPG price increased and the variance decreased during the cartel period in all cities we analyzed. We also corroborate the efficiency of the method, as the hypothesis of economic signs of cartel was not rejected for Campina Grande-PB.