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Econometric Evidence To Target Tacit Collusion In Oligopolistic Markets

Author

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  • Patrick Andreoli-Versbach
  • Jens-Uwe Franck

Abstract

Tacit collusion may reduce welfare comparably to explicit collusion, but it remains mostly unaddressed by antitrust enforcement that greatly depends on evidence of explicit communication. We propose to target specific elements of firms' behavior that facilitate tacit collusion by providing quantitative evidence that links these actions to an anticompetitive market outcome. We apply our approach to incidents on the Italian gasoline market, where the market leader unilaterally announced its commitment to a policy of sticky pricing and large price changes that facilitated price alignment and coordination of price changes. Antitrust policy must distinguish such active promotion of a collusive strategy from passive, best-response, alignment. Our results imply the necessity of stronger legal instruments that target unilateral conduct that aims at bringing about collusion.

Suggested Citation

  • Patrick Andreoli-Versbach & Jens-Uwe Franck, 2015. "Econometric Evidence To Target Tacit Collusion In Oligopolistic Markets," Journal of Competition Law and Economics, Oxford University Press, vol. 11(2), pages 463-492.
    • Handle: RePEc:oup:jcomle:v:11:y:2015:i:2:p:463-492.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhv011
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    Citations

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    Cited by:

    1. Yaseen GHULAM, 2018. "The Impact Of Reforms And Privatization On Firms’ Conduct In The Presence Of Interconnected Conglomerates And Weak And Inefficient Regulatory Institutions," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(4), pages 599-622, December.
    2. Andreoli-Versbach, Patrick & Franck, Jens-Uwe, 2015. "Endogenous price commitment, sticky and leadership pricing: Evidence from the Italian petrol market," International Journal of Industrial Organization, Elsevier, vol. 40(C), pages 32-48.
    3. Aleksandr V. Kniaginin, 2018. "Impact of the Antitrust Legislation Interpretation on the Declaration of Firms to be Guilty of Tacit Collusion," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 3, pages 78-89, June.
    4. Wu, Jiang & Zou, Liuxin & Gong, Yeming & Chen, Mingyang, 2021. "The anti-collusion dilemma: Information sharing of the supply chain under buyback contracts," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    5. Zhang, Xiao-Bing & Fei, Yinxin & Zheng, Ying & Zhang, Lei, 2020. "Price ceilings as focal points to reach price uniformity: Evidence from a Chinese gasoline market," Energy Economics, Elsevier, vol. 92(C).

    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels

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