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Actions Speak Louder than Words: Econometric Evidence to Target Tacit Collusion in Oligopolistic Markets

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  • Andreoli-Versbach, Patrick
  • Franck, Jens-Uwe

Abstract

Tacit collusion reduces welfare comparably to explicit collusion but remains mostly unaddressed by antitrust enforcement which greatly depends on evidence of explicit communication. We propose to target specific elements of firms’ behavior that facilitate tacit collusion by providing quantitative evidence that links these actions to an anticompetitive market outcome. We apply our approach to incidents on the Italian gasoline market where the market leader unilaterally announced its commitment to a policy of sticky pricing and large price changes which facilitated price alignment and coordination of price changes. Antitrust policy has to distinguish such active promotion of a collusive strategy from passive (best response) alignment. Our results imply the necessity of stronger legal instruments which target unilateral conduct that aims at bringing about collusion.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 16179.

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Date of creation: Jul 2013
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Handle: RePEc:lmu:muenec:16179

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Keywords: antitrust law; tacit collusion; oligopolistic competition; gasoline market;

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