Competitive assessment of an oligopolistic market open to international trade with incomplete data

This paper is aimed at detecting whether an oligopolistic industry facing an international competition can sustain collusion or whether international trade disciplines it to competition. To do so we consider a differentiated-products oligopoly model and we estimate both demand and supply sides of the industry under investigation. The empirical analysis is performed in four steps. In the first step, we build a mathematical representation of the working of the industry. The second step is devoted to the estimation of the model under the assumption that the market is competitive. The third step provides an estimation of the model when it is assumed that the main firms on the market are forming a cartel and, more specifically, are behaving like a monopoly. Finally, the fourth step consists in comparing the two estimations in their capacity to represent reality, i.e., detecting which of the conducts - competition or collusion - is the most statistically adequate to represent the working of the market. The main result is that, in the industry under consideration and regarding the period of interest, the competition model statistically performs better than the collusion model. The very innovative part of the analysis here lies in the use of a limited amount of information. Indeed we perform the estimation of the model based on data from only one firm of the oligopoly and some aggregated data, thanks to the specification and the role of the international side of the market.