cartels that were also involved in both international and domestic markets.

### 3. The Data

The target of the present paper was cartels (which does not include bid-rigging in government procurement) in Japan manufacturing industries (Category F in JSIC) which “unfair restraint of trade” was ordered or which surcharge were assessed directly without such order between 1990 and 2004. This data includes discovered cartels only and thus it does not include cartels against which no government actions were taken. Thus, our cartel data is not a proper measure for all cartels which exist within these industries over the sample periods. Moreover, even in cases where a cartel was suspected, if the government was unable to act on those suspicions, then it was not recognized as a cartel and thus is not reflected in the data. That is, empirical results with the discovered cartels may also reflect the ability of the competition authority to capture cartels. Given these limitations on our data, special cares are required in interpreting results.

However, even when focusing only on cartels against which the government action was taken, this is sufficient for grasping the characteristics of Japanese industries in which cartels occur because we are able to delve into the relationship between cartels existing in Japan and the structural factors of industries in which cartels are recognized. Furthermore, given the fact that Jacquemin et al. (1981) is thought to be the only research to use data on cartels in Japan in analyzing the relationship between cartels and industry structures, we believe this study can provide empirics on the economic theory of cartels.

In this section, first we discuss the data for dependent variables and independent variables. Second, referring to the theoretical hypotheses intensively studied in economics so far, we summarize theoretical relationships between demand and supply factors and the formation of cartels.

## (1) Dependent variables

First, we explain dependent variables used in this study. The basis for dependent variables are cartels within Japan’s manufacturing industries which “unfair trade restrictions” were ordered for or against which action penalties were assessed directly without such warning by the JFTC between 1990 and 2004. Following OFT (2005), we use the following three types of dependent variables. The first one is a binomial variable reflecting that if no cartel was confirmed during the sample periods, then it takes 0, and 1 otherwise (that is, if a cartel was confirmed.). The second one is an ordered variable which states that if no cartel was confirmed, then it takes 0. If only a single cartel was confirmed, then it takes 1, and if two or more cartels were confirmed, then it takes 2. In addition to whether or not cartel is confirmed, the second variable also evaluates whether or not there were multiple instances of violations. The third one represents the actual number of cartels (including 0 cases) which occurred during the sample periods.

The 3-digit code category in JSIC lists 150 categories for manufacturers, and thus it is ideal to use all the 150 industries. However, in consideration of issues related to data availability, this analysis uses data from