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On prices’ cyclical behaviour in oligopolistic markets

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  • Lambertini, Luca
  • Marattin, Luigi

Abstract

We revisit the discussion about the relationship between price’s cyclical features, implicit collusion and the demand level in an oligopoly supergame where a positive shock may hit demand and disrupt collusion. The novel feature of our model consists in characterising the post-shock noncooperative price and comparing it against the cartel price played in the last period of the collusive path, to single out the conditions for procyclicality to arise both in the short and in the long-run. This poses an issue in terms of an antitrust agency’s ability to draw well defined conclusions on the firms’ behaviour after the occurrence of the shock, with particular reference for the litigation phase after a cartel breakdown.

Suggested Citation

  • Lambertini, Luca & Marattin, Luigi, 2021. "On prices’ cyclical behaviour in oligopolistic markets," Research in Economics, Elsevier, vol. 75(1), pages 79-86.
  • Handle: RePEc:eee:reecon:v:75:y:2021:i:1:p:79-86
    DOI: 10.1016/j.rie.2020.11.003
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    More about this item

    Keywords

    Demand shocks; Cyclical pricing; Tacit collusion;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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