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Cartel in the Indian cement industry: An attempt to identify it

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  • Bejger, Sylwester
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    Abstract

    This article is devoted to the problem of the detection of overt or tacit collusion equilibrium in the context of the choice of the appropriate econometric method, a choice that is determined by the amount of information that the observer possesses. The author addresses this problem in two steps. First, to provide a theoretical background, he uses a collusion marker based on structural disturbances in a price process'; variance. Then, he applies a Markov switching model with switching in variance regimes. The author considers this method adequate and coherent with the problem structure and the research objective, and useful for assessing the functionality of the collusion marker he uses. He uses the model to examine the Indian cement industry in the period 1994-2009 and finds some objective indications of collusion and competition phases. These phases are confirmed by certain historical facts as well as by numerous research articles. --

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    Bibliographic Info

    Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number 2012-18.

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    Date of creation: 2012
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    Handle: RePEc:zbw:ifwedp:201218

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    Keywords: Explicit and tacit collusion; collusive equilibrium; cartel detection; cement industry; price variance; Markov switching model;

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    1. Sylwester Bejger, 2009. "Econometric Tools for Detection of Collusion Equilibrium in the Industry," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 9, pages 27-38.
    2. Susan Athey & Kyle Bagwell & Chris Sanchirico, 2002. "Collusion and price rigidity," Discussion Papers 0102-38, Columbia University, Department of Economics.
    3. Bolotova, Yuliya & Connor, John M. & Miller, Douglas J., 2008. "The impact of collusion on price behavior: Empirical results from two recent cases," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1290-1307, November.
    4. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
    5. John Connor & C. Gustav Helmers, 2006. "Statistics On Modern Private International Cartels, 1990-2005," Working Papers 06-11, Purdue University, College of Agriculture, Department of Agricultural Economics.
    6. Hamilton, James D. & Susmel, Raul, 1994. "Autoregressive conditional heteroskedasticity and changes in regime," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 307-333.
    7. Abrantes-Metz, Rosa M. & Froeb, Luke M. & Geweke, John & Taylor, Christopher T., 2006. "A variance screen for collusion," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 467-486, May.
    8. Rotemberg, Julio J & Saloner, Garth, 1990. "Collusive Price Leadership," Journal of Industrial Economics, Wiley Blackwell, vol. 39(1), pages 93-111, September.
    9. Davidson, James, 2004. "Forecasting Markov-switching dynamic, conditionally heteroscedastic processes," Statistics & Probability Letters, Elsevier, vol. 68(2), pages 137-147, June.
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