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Does Parallel Behavior Provide Some Evidence of Collusion?

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  • Paolo Buccirossi

    (Lear)

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    Abstract

    Antitrust authorities often consider parallel pricing and market share stability to be clues of illegal collusion. To analyze whether this inference is correct, I develop a model of price competition with differentiated products in which demand and costs vary over time. In many cases parallel pricing does not distinguish between a competitive and a collusive outcome. However, in some cases perfect parallel pricing is compatible only with a competitive equilibrium, and therefore provides some evidence that firms did not collude. I also show that the competitive equilibrium is characterized by a higher market share stability than a collusive equilibrium.

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    File URL: http://www.bepress.com/cgi/viewcontent.cgi?article=1027&context=rle
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    Bibliographic Info

    Article provided by De Gruyter in its journal Review of Law & Economics.

    Volume (Year): 2 (2006)
    Issue (Month): 1 ()
    Pages: 5

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    Handle: RePEc:bpj:rlecon:v:2:y:2006:i:1:n:5

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/rle

    Related research

    Keywords: Collusion; antitrust; competition; parallelism;

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    Cited by:
    1. Oilver Budzinski & Katharina Wacker, 2007. "The Prohibition of the Proposed Springer-ProSiebenSat.1-Merger: How much Economics in German Merger Control?," Marburg Working Papers on Economics 200704, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. de Mesnard, Louis, 2009. "Is the French mobile phone cartel really a cartel?," International Journal of Production Economics, Elsevier, vol. 122(2), pages 663-677, December.

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