Cartel pricing dynamics with cost variability and endogenous buyer detection
This paper characterizes collusive pricing patterns when buyers may detect the presence of a cartel. Buyers are assumed to become suspicious when observed prices are anomalous. We find that the cartel price path is comprised of two phases. During the transitional phase, price is generally rising and relatively unresponsive to cost shocks. During the stationary phase, price responds to cost but is much less sensitive than under non-collusion or simple monopoly. The length of the transition phase is decreasing in the variance of cost shocks. It is also shown that the cartel price path may overshoot its long-run level so that price converges from above.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joseph E Harrington, 2001.
"Optimal Cartel Pricing in the Presence of an Antitrust Authority,"
Economics Working Paper Archive
460, The Johns Hopkins University,Department of Economics, revised Jul 2002.
- Joseph E. Harrington, 2005. "Optimal Cartel Pricing In The Presence Of An Antitrust Authority," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 145-169, 02.
- Philippe Cyrenne, 1999. "On Antitrust Enforcement and the Deterrence of Collusive Behaviour," Review of Industrial Organization, Springer, vol. 14(3), pages 257-272, May.
- 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.
- Hay, George A & Kelley, Daniel, 1974. "An Empirical Survey of Price Fixing Conspiracies," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 13-38, April.
- Motta, Massimo & Polo, Michele, 2000.
"Leniency Programs and Cartel Prosecution,"
CEPR Discussion Papers
2349, C.E.P.R. Discussion Papers.
- Motta, M. & Polo, M., 1999. "Leniency Programs and Cartel Prosecution," Economics Working Papers eco99/23, European University Institute.
- Massimo Motta & Michele Polo, . "Leniency Programs and Cartel Prosecution," Working Papers 150, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Besanko, David & Spulber, Daniel F, 1990. "Are Treble Damages Neutral? Sequential Equilibrium and Private Antitrust Enforcement," American Economic Review, American Economic Association, vol. 80(4), pages 870-87, September.
- Joseph E Harrington Jr, 2002.
"Cartel Pricing Dynamics in the Presence of an Antitrust Authority,"
Economics Working Paper Archive
487, The Johns Hopkins University,Department of Economics, revised May 2003.
- Joseph E. Harrington, Jr., 2004. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 651-673, Winter.
- Joseph E. Harrington, Jr., 2003. "Cartel Pricing Dynamics in the Presence of an Antitrust Authority," Computing in Economics and Finance 2003 26, Society for Computational Economics.
- Green, Edward J & Porter, Robert H, 1984.
"Noncooperative Collusion under Imperfect Price Information,"
Econometric Society, vol. 52(1), pages 87-100, January.
- Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
- Edward J Green & Robert H Porter, 1997. "Noncooperative Collusion Under Imperfect Price Information," Levine's Working Paper Archive 1147, David K. Levine.
- 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.
- 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).
- Saïd Souam, 1997.
"Optimal Antitrust Policy Under Different Regimes of Fines,"
97-37, Centre de Recherche en Economie et Statistique.
- Souam, Said, 2001. "Optimal antitrust policy under different regimes of fines," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 1-26, January.
- Foster, Dean P. & Young, H. Peyton, 2003.
"Learning, hypothesis testing, and Nash equilibrium,"
Games and Economic Behavior,
Elsevier, vol. 45(1), pages 73-96, October.
- Block, Michael Kent & Nold, Frederick Carl, 1981. "The Deterrent Effect of Antitrust Enforcement," Journal of Political Economy, University of Chicago Press, vol. 89(3), pages 429-45, June.
- Joseph E. Harrington, 2004.
"Post-Cartel Pricing During Litigation,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 52(4), pages 517-533, December.
- Harrington, Joseph Jr., 2003. "Some implications of antitrust laws for cartel pricing," Economics Letters, Elsevier, vol. 79(3), pages 377-383, June.
- Christie, William G & Schultz, Paul H, 1994. " Why Do NASDAQ Market Makers Avoid Odd-Eighth Quotes?," Journal of Finance, American Finance Association, vol. 49(5), pages 1813-40, December.
- Chantale LaCasse, 1995. "Bid Rigging and the Threat of Government Prosecution," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 398-417, Autumn.
- Besanko, David & Spulber, Daniel F, 1989. "Antitrust Enforcement under Asymmetric Information," Economic Journal, Royal Economic Society, vol. 99(396), pages 408-25, June.
When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:24:y:2006:i:6:p:1185-1212. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.