IDEAS home Printed from https://ideas.repec.org/p/wop/yaluwp/_017.html

Testing Game-Theoretic Models of Price Fixing Behaviour

Author

Listed:
  • Vassilis A. Hajivassiliou

    (Yale University)

Abstract

This paper analyses price fixing by the Joint Executive Committee railroad cartel from 1880 to 1886 and develops tests of two game-theoretic models of tacit collusion. The first model, due to Abreu, Pearce and Stacchetti (1986), predicts that price will switch across regimes according to a Markov process. The second model, by Rotemberg and Saloner (1986), concludes that price wars are more likely in periods of high industry demand. Switching regressions are used to model the firms? shifting between collusive and punishment behaviour. The main econometric novelty introduced in this paper is that misclassification probabilities are allowed to vary endogenously over time. The JEC data set is expanded to include measures of grain production to be shipped and availability of substitute transportation services. The findings cast doubt on the applicability of the Rotemberg and Saloner model to the JEC railroad cartel, while they confirm the Markovian prediction of the Abreu et al model.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Vassilis A. Hajivassiliou, 1993. "Testing Game-Theoretic Models of Price Fixing Behaviour," Working Papers _017, Yale University.
    • Handle: RePEc:wop:yaluwp:_017
    as

    Download full text from publisher

    File URL: ftp://ftp.econ.yale.edu/pub/vassilis/papers/ps/cartel.zip
    Download Restriction: no
    ---><---

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David G. Pearce, 1991. "Repeated Games: Cooperation and Rationality," Cowles Foundation Discussion Papers 983, Cowles Foundation for Research in Economics, Yale University.
    2. Richards, Timothy J. & Patterson, Paul M., 2004. "Causes of retail price fixity: an empirical analysis," Journal of Economics and Business, Elsevier, vol. 56(2), pages 117-136.

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wop:yaluwp:_017. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Krichel (email available below). General contact details of provider: https://edirc.repec.org/data/edyalus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.