Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards
AbstractWe test whether a nonbinding price ceiling may serve as a focal point for tacit collusion, using data from the credit card market during the 1980's. Our empirical model can distinguish instances when firms match a binding ceiling from instances when firms tacitly collude at a nonbinding ceiling. The results suggest that tacit collusion at nonbinding state-level ceilings was prevalent during the early 1980's, but that national integration of the market reduced the sustainability of tacit collusion by the end of the decade. The results highlight a perverse effect of price regulation.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 93 (2003)
Issue (Month): 5 (December)
Other versions of this item:
- Christopher R. Knittel & Victor Stango, 2001. "Price ceilings as focal points for tacit collusion: evidence from credit cards," Working Paper Series WP-01-12, Federal Reserve Bank of Chicago.
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