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Does Parallel Behavior Provide Some Evidence of Collusion?

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  • Buccirossi Paolo

    (LEAR – Laboratorio di economia, antitrust regolamentazione, Rome)

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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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    Bibliographic Info

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

    Volume (Year): 2 (2006)
    Issue (Month): 1 (July)
    Pages: 85-102

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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

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    Cited by:
    1. Budzinski, Oliver & Wacker, Katharina, 2007. "The prohibition of the proposed Springer-ProSiebenSat.1-Merger: how much economics in German merger control?," IBES Diskussionsbeiträge 160, University of Duisburg-Essen, Faculty for Economics and Business Administration.
    2. Constantin BELU, 2012. "Pricing Patterns And Implications For Competition Policy," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 10, pages 97-103, December.
    3. Juan Jiménez & Jordi Perdiguero, 2012. "Does Rigidity of Prices Hide Collusion?," Review of Industrial Organization, Springer, vol. 41(3), pages 223-248, November.
    4. Mesnard, Louis de, 2009. "Is the French mobile phone cartel really a cartel?," LEG - Document de travail - Economie 2009-02, LEG, Laboratoire d'Economie et de Gestion, CNRS, Université de Bourgogne.

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