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Tacit Collusion under Imperfect Monitoring in the Canadian Manufacturing Industry: An Empirical Study

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  • Marcelo Resende
  • Rodrigo M. Zeidan

Abstract

The paper undertakes a cross-sectoral analysis of a salient empirical implication of the model of tacit collusion advanced by Abreu et al (1986). Specifically, the prevalence of a first order Markovian process for alternating between price wars and collusive periods is assessed by means of non-parametric tests. The analysis focuses on 30 different industries in Canada. The evidence provides weak support for optimal collusion in one industry, which is consistent with the idea that such collusive arrangements are unusual.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3623.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3623

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Keywords: tacit collusion; game theory; Canada; price war;

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References

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  1. Leola Ross, 1997. "When Will an Airline Stand Its Ground? An Analysis of Fare Wars," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 4(2), pages 109-127.
  2. Leola B. Ross, . "When Will an Airline Stand Its Ground? An Analysis of Fare Wars," Working Papers, East Carolina University, Department of Economics 9703, East Carolina University, Department of Economics.
  3. Abreu, Dilip & Pearce, David & Stacchetti, Ennio, 1986. "Optimal cartel equilibria with imperfect monitoring," Journal of Economic Theory, Elsevier, Elsevier, vol. 39(1), pages 251-269, June.
  4. Christopher Knittel & Jason Lepore, 2006. "Tacit Collusion in the Presence of Cyclical Demand and Endogenous Capacity Levels," Working Papers, University of California, Davis, Department of Economics 631, University of California, Davis, Department of Economics.
  5. Severin Boreinstein & Andrea Shepard, 1996. "Dynamic Pricing in Retail Gasoline Markets," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 429-451, Autumn.
  6. Robert W. Staiger & Frank A. Wolak, 1992. "Collusive Pricing with Capacity Constraints in the Presence of Demand Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 203-220, Summer.
  7. Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
  8. repec:fth:guelph:1993-10 is not listed on IDEAS
  9. Rees, R., 1993. "Tacit Collusion," Working Papers, University of Guelph, Department of Economics and Finance 1993-10, University of Guelph, Department of Economics and Finance.
  10. Lu, Yuanzhu & Wright, Julian, 2010. "Tacit collusion with price-matching punishments," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 28(3), pages 298-306, May.
  11. Lee, Lung-Fei & Porter, Robert H, 1984. "Switching Regression Models with Imperfect Sample Separation Information-With an Application on Cartel Stability," Econometrica, Econometric Society, Econometric Society, vol. 52(2), pages 391-418, March.
  12. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 186, Institut d'Économie Industrielle (IDEI), Toulouse.
  13. Rees, Ray, 1993. "Tacit Collusion," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 9(2), pages 27-40, Summer.
  14. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  15. Morrison, Steven A & Winston, Clifford, 1990. "The Dynamics of Airline Pricing and Competition," American Economic Review, American Economic Association, American Economic Association, vol. 80(2), pages 389-93, May.
  16. Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, American Economic Association, vol. 76(3), pages 390-407, June.
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