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How Product Innovation Can Affect Price Collusion

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  • Andrew Smyth

    (Department of Economics, Marquette University and Economic Science Institute, Chapman University)

Abstract

Price conspiracies appear endemic in many markets. This paper conjectures that low expected returns from product innovation can affect price collusion in certain markets. This conjecture is tested—and supported—by both archival and experimental data. In particular, average market prices in low innovation experiments are significantly greater than those in high innovation, but otherwise identical experiments, because price collusion is more successful in the low innovation experiments.

Suggested Citation

  • Andrew Smyth, 2017. "How Product Innovation Can Affect Price Collusion," Working Papers 17-26, Chapman University, Economic Science Institute.
    • Handle: RePEc:chu:wpaper:17-26
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    File URL: https://www.chapman.edu/research/institutes-and-centers/economic-science-institute/_files/WorkingPapers/product-innovation-affect-price-collusion-smyth-2017.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    price collusion; product innovation; antitrust; experimental economics;
    All these keywords.

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior

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