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Status Quo Effects in Bargaining: An Empirical Analysis of OPEC

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Author Info
Kyle Hyndman (New York University)

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Abstract

We conduct an event analysis on OPEC quota announcements to determine their impact on the stock returns in the oil industry. We find that announcements to reduce the quota are followed by positive excess returns over pre-announcement levels, announcements of no action are met with negative excess returns and announcements to increase the quota have no significant impact on stock market returns. This suggests that there is an asymmetric ability on the part of OPEC to secure agreements. In particular, when demand has increased, agreements are easily forthcoming, while when times are bad the probability of a disagreement is substantially higher. We present further empirical as well as anecdotal evidence to support our interpretation. A bargaining model with one-sided private information which generates such predictions is also discussed. We also show that our model explains observed patterns in cheating by OPEC countries.

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Publisher Info
Paper provided by EconWPA in its series Industrial Organization with number 0511016.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 38 pages
Date of creation: 29 Nov 2005
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Handle: RePEc:wpa:wuwpio:0511016

Note: Type of Document - pdf; pages: 38
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Web page: http://129.3.20.41

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Related research
Keywords: Status Quo; OPEC; Collusion; Disagreement; Bargaining;

Other versions of this item:

Find related papers by JEL classification:
D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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  17. Tito Boeri & Axel Börsch-Supan & Guido Tabellini, 2001. "Would you like to shrink the welfare state? A survey of European citizens," Economic Policy, CEPR, CES, MSH, vol. 16(32), pages 7-50, 04. [Downloadable!] (restricted)
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