Episode Details

How can economists find a cartel if there is no agreement? Nasdaq stocks were quoted in eighths of a dollar in the early 1990s. But economists discovered that for many heavily traded stocks, half of those potential price increments were rarely used. This pattern became known as the Nasdaq “missing eighth.”

The research was made public, the dealers acted quickly, and the spreads tightened. Later investigation unearthed evidence that reached far beyond the initial statistical anomaly.

In Episode 3 of How Cartels Really Work, we take this episode to discuss a fundamental distinction in antitrust economics: empirical evidence can detect suspicious behavior, but an unusual pattern is not proof of an agreement on its own.

Sometimes the economist discovers the pool. Sometimes the economist finds a reason to start looking.

Read the full article and graphic analysis: https://blog.econworks.com/p/cartels-episode-3-can-data-reveal?r=562wri

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