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Econometric Tools for Detection of Collusion Equilibrium in the Industry

Listed author(s):
  • Sylwester Bejger

    ()

    (Nicolaus Copernicus University in Torun)

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    The article presents the notion of detection of overt or tacit collusion equilibrium in the context of choice of the appropriate econometric method, which is determined by the amount of information that the observer possesses. There has been shown one of the collusion markers coherent with an equilibrium of the proper model of strategic interaction – the presence of structural disturbances in the price process variance for phases of collusion and competition. The Markov Switching Model with switching of variance regimes has been proposed as a proper theoretical method detecting that type of changes without prior knowledge of switching moments. In order to verify the effectiveness of the method it has been applied to a series of lysine market prices throughout and after termination of its manufacturers’ collusion.

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    File URL: http://www.dem.umk.pl/dem/archiwa/v9/04_SBejger_UMK.pdf
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    Article provided by Uniwersytet Mikolaja Kopernika in its journal Dynamic Econometric Models.

    Volume (Year): 9 (2009)
    Issue (Month): ()
    Pages: 27-38

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    Handle: RePEc:cpn:umkdem:v:9:y:2009:p:27-38
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    1. 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.
    2. Susan Athey & Kyle Bagwell & Chris Sanchirico, 2004. "Collusion and Price Rigidity," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 317-349.
    3. Bolotova, Yuliya & Connor, John M. & Miller, Douglas J., 2005. "The Impact of Collusion on Price Behavior: Empirical Results from Two Recent Cases," 2005 Annual meeting, July 24-27, Providence, RI 19164, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. John Haltiwanger & Joseph E. Harrington Jr., 1991. "The Impact of Cyclical Demand Movements on Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 89-106, Spring.
    5. N. Terui & Herman K. van Dijk, 2000. "Combined Forecasts from Linear and Nonlinear Time Series Models," Tinbergen Institute Discussion Papers 00-003/4, Tinbergen Institute.
    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. 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 357-384, March.
    8. John Connor, 2001. "“Our Customers Are Our Enemies”: The Lysine Cartel of 1992–1995," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(1), pages 5-21, February.
    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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