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Does Parallel Behavior Provide Some Evidence of Collusion?

  • Buccirossi Paolo

    (LEAR – Laboratorio di economia, antitrust regolamentazione, Rome)

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    Antitrust authorities often consider parallel pricing and market share stability to be clues of illegal collusion. To analyze whether this inference is correct, I develop a model of price competition with differentiated products in which demand and costs vary over time. In many cases parallel pricing does not distinguish between a competitive and a collusive outcome. However, in some cases perfect parallel pricing is compatible only with a competitive equilibrium, and therefore provides some evidence that firms did not collude. I also show that the competitive equilibrium is characterized by a higher market share stability than a collusive equilibrium.

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    Article provided by De Gruyter in its journal Review of Law & Economics.

    Volume (Year): 2 (2006)
    Issue (Month): 1 (July)
    Pages: 85-102

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    Handle: RePEc:bpj:rlecon:v:2:y:2006:i:1:n:5
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