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The Effects of the Business Cycle on Oligopoly Coordination: Evidence from the U.S. Rayon Industry

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Author Info

  • Gallet, Craig A.
  • Schroeter, John R.

Abstract

Recent game-theoretic studies of the effects of the business cycle on oligopoly coordination predict that coordination is weakest when demand is high and expected future profit is lower. An empirical model that uses a conjectural elasticity term to measure the degree of coordination is developed to test for these two effects. The rayon industry of the 1930s is one that exhibited significantly non-competitive condudct that appears to have varied, in degree, with fluctuations in demand. Application of the empirical model to data from this industry produces results that support the predictions of recent theoretical models.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 5250.

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Date of creation: 01 Apr 1995
Date of revision:
Publication status: Published in Review of Industrial Organization, April 1995, vol. 10 no. 2, pp. 181-196
Handle: RePEc:isu:genres:5250

Contact details of provider:
Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
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Web page: http://www.econ.iastate.edu
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Cited by:
  1. Margaret C. Levenstein & Valerie Y. Suslow, 2002. "What Determines Cartel Success?," UMASS Amherst Economics Working Papers 2002-01, University of Massachusetts Amherst, Department of Economics.
  2. Andrew Wood, 2005. "Investment interdependence and the coordination of lumpy investments: evidence from the British brick industry," Applied Economics, Taylor and Francis Journals, vol. 37(1), pages 37-49.
  3. Gallet, Craig A., 1997. "Public policy and market power in the rayon industry," Journal of Economics and Business, Elsevier, vol. 49(4), pages 369-377.
  4. Ozbugday, F.C., 2011. "Exploring National Concerted Practices in an Open Small Economy: What Does the Change in the Competition Law in the Netherlands Reveal?," Discussion Paper 2011-021, Tilburg University, Tilburg Law and Economic Center.
  5. Habtu T. Weldegebriel & Xiuqing Wang & Anthony J. Rayner, 2012. "Price transmission market power and industry technology: a note," China Agricultural Economic Review, Emerald Group Publishing, vol. 4(3), pages 281-299, October.
  6. Kutlu, Levent & Sickles, Robin C., 2012. "Estimation of market power in the presence of firm level inefficiencies," Journal of Econometrics, Elsevier, vol. 168(1), pages 141-155.
  7. John A. List, 2009. "The Economics of Open Air Markets," NBER Working Papers 15420, National Bureau of Economic Research, Inc.

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