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Collusion and price dispersion

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  • John Connor

Abstract

While there are suggestions in applied cartel studies that price dispersion changes when cartelization of a market occurs, there are few theoretical or empirical analyses of this effect. This article surveys the thin economic literature on the link between overt collusion and price dispersion. Formal theories and observation of cartel behaviour suggest that during successfully collusive periods prices become less variable and more negatively skewed compared to relatively competitive periods. Four empirical studies of cartels verify these predictions.

Suggested Citation

  • John Connor, 2005. "Collusion and price dispersion," Applied Economics Letters, Taylor & Francis Journals, vol. 12(6), pages 335-338.
  • Handle: RePEc:taf:apeclt:v:12:y:2005:i:6:p:335-338
    DOI: 10.1080/13504850500068061
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    References listed on IDEAS

    as
    1. Susan Athey & Kyle Bagwell & Chris Sanchirico, 2004. "Collusion and Price Rigidity," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 317-349.
    2. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-683, August.
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    Citations

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    Cited by:

    1. Ofer H. Azar, 2013. "Firm strategy and biased decision making: the price dispersion puzzle," Applied Economics, Taylor & Francis Journals, vol. 45(7), pages 901-910, March.
    2. Andreoli-Versbach, Patrick & Franck, Jens-Uwe, 2013. "Actions Speak Louder than Words: Econometric Evidence to Target Tacit Collusion in Oligopolistic Markets," Discussion Papers in Economics 16179, University of Munich, Department of Economics.
    3. Korbinian Blanckenburg & Alexander Geist, 2009. "How Can a Cartel Be Detected?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 15(4), pages 421-436, November.
    4. 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.
    5. Li Gan & Manuel A. Hernandez, 2013. "Making Friends with Your Neighbors? Agglomeration and Tacit Collusion in The Lodging Industry," The Review of Economics and Statistics, MIT Press, vol. 95(3), pages 1002-1017, July.
    6. Korbinian von Blanckenburg & Marc Hanfeld & Konstantin A. Kholodilin, 2013. "A Market Screening Model for Price Inconstancies: Empirical Evidence from German Electricity Markets," Discussion Papers of DIW Berlin 1274, DIW Berlin, German Institute for Economic Research.
    7. 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.
    8. 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.
    9. Yuliya Bolotova & Christopher S. McIntosh & Paul E. Patterson & Kalamani Muthusamy, 2010. "Is stabilization of potato price effective? Empirical evidence from the Idaho Russet Burbank potato market," Agribusiness, John Wiley & Sons, Ltd., vol. 26(2), pages 177-201.
    10. repec:kap:iaecre:v:15:y:2009:i:4:p:421-436 is not listed on IDEAS
    11. Juan Jiménez & Jordi Perdiguero, 2012. "Does Rigidity of Prices Hide Collusion?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 41(3), pages 223-248, November.
    12. Gu, Gyun Cheol, 2012. "Denial, Rationalization, and the Administered Price Thesis," MPRA Paper 42594, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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