Cartel screening tools involve statistical tests based on an econometric model and a theory of the alleged illegal behavior, designed to identify whether manipulation, collusion, fraud, or any other type of cheating may exist in a particular market. The Coordination Failure Diagnostics (CFD) is one such tool developed for the detection of cartels by observing market process patterns.

 

The CFD methodology is based on the assumption that existing cartels cause disturbances in observed process patterns by detecting disequilibria through identifying circumstances that indicate welfare losses. The CFD model exploits five market processes as control loop mechanisms in a cybernetic sense where shocks affect the adjusted variable (e.g. the difference in quantity between demand and supply) and the control variable (e.g. the price) and drives the adjusted variable back to its equilibrium value. The equilibrium of the adjusted variable is zero as the equilibrium quantity supplied equals the quantity demanded. This implies that all other values constitute defects and cause welfare loss. As a result, the value of the adjusted variable can show the level of workability of the market process.

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