Economic Effects of the Lysine Cartel

This chapter documents the economic effects of the lysine cartel on prices, production levels, international trade, and buyers' incomes. Monetary estimates of these effects typically play a key role in legal actions to punish cartels or compensate their victims. The legal ramifications of the lysine cartel are discussed in Chapters 13 to 15.

The principal objective of the lysine cartel was to raise selling prices around the world, thereby generating profits well in excess of the profits cartel members would have earned if the normal forces of demand and supply had been allowed to play out. The decision to collude or not to collude involves a weighing of expected benefits and costs. The corporate benefits are primarily the increases in company profits above normal levels combined with a subjective probability of the likelihood of success. Personal benefits may accrue to participants as well through faster job promotions, profit sharing, and the excitement of undercover activities. The costs are probabilistic notions of the social and economic pain that might be imparted by prison time or fines for antitrust violations adjusted downward by the probability of being caught, indicted, and found guilty. The probability of discovery is well under 100% (see Box).