Status Quo Effects in Bargaining: An Empirical Analysis of OPEC
We conduct an event analysis on OPEC quota announcements to determine their impact on the stock returns in the oil industry. We find that announcements to reduce the quota are followed by positive excess returns over pre-announcement levels, announcements of no action are met with negative excess returns and announcements to increase the quota have no significant impact on stock market returns. This suggests that there is an asymmetric ability on the part of OPEC to secure agreements. In particular, when demand has increased, agreements are easily forthcoming, while when times are bad the probability of a disagreement is substantially higher. We present further empirical as well as anecdotal evidence to support our interpretation. A bargaining model with one-sided private information which generates such predictions is also discussed. We also show that our model explains observed patterns in cheating by OPEC countries.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simon Gächter & Arno Riedl, .
"Moral Property Rights in Bargaining,"
IEW - Working Papers
113, Institute for Empirical Research in Economics - University of Zurich.
- repec:att:wimass:9504 is not listed on IDEAS
- Griffin, James M & Xiong, Weiwen, 1997. "The Incentive to Cheat: An Empirical Analysis of OPEC," Journal of Law and Economics, University of Chicago Press, vol. 40(2), pages 289-316, October.
- Kyle Bagwell & Robert W. Staiger, 1995.
"Collusion over the Business Cycle,"
NBER Working Papers
5056, National Bureau of Economic Research, Inc.
- David Card, 1986.
"Longitudinal Analysis of Strike Activity,"
593, Princeton University, Department of Economics, Industrial Relations Section..
- Kennan, John, 1985. "The duration of contract strikes in U.S. manufacturing," Journal of Econometrics, Elsevier, vol. 28(1), pages 5-28, April.
- Susan Athey & Kyle Bagwell & Chris Sanchirico, 2004.
"Collusion and Price Rigidity,"
Review of Economic Studies,
Oxford University Press, vol. 71(2), pages 317-349.
- Susan Athey & Kyle Bagwell & Chris Sanchirico, 2002. "Collusion and price rigidity," Discussion Papers 0102-38, Columbia University, Department of Economics.
- Susan Athey & Kyle Bagwell & Chris Sanchirico, 1998. "Collusion and Price Rigidity," Working papers 98-23, Massachusetts Institute of Technology (MIT), Department of Economics.
- Kyle Bagwell, 2004. "Collusion and Price Rigidity," Theory workshop papers 658612000000000081, UCLA Department of Economics.
- Matt Lewis, 2004.
"Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market,"
- Matthew S. Lewis, 2011. "Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(2), pages 409-449, 06.
- Lewis, Matt, 2004. "Asymmetric Price Adjustment and Consumer Search: An Examination of the Retail Gasoline Market," Competition Policy Center, Working Paper Series qt9pv2d9fn, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
- Ken B. Cyree & Ramon P. DeGennaro, 2001.
"A generalized method for detecting abnormal returns and changes in systematic risk,"
2001-8, Federal Reserve Bank of Atlanta.
- Cyree, Ken B & DeGennaro, Ramon P, 2002. " A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk," Review of Quantitative Finance and Accounting, Springer, vol. 19(4), pages 399-416, December.
- Sam Peltzman, 1998.
"Prices Rise Faster Than They Fall,"
University of Chicago - George G. Stigler Center for Study of Economy and State
142, Chicago - Center for Study of Economy and State.
- Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June.
- Card, David, 1990. "Strikes and Wages: A Test of an Asymmetric Information Model," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 625-59, August.
- Robert K. Kaufmann, Stephane Dees, Pavlos Karadeloglou and Marcelo Sanchez, 2004. "Does OPEC Matter? An Econometric Analysis of Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 67-90.
- Hart, Oliver, 1989.
"Bargaining and Strikes,"
The Quarterly Journal of Economics,
MIT Press, vol. 104(1), pages 25-43, February.
- Tito Boeri & Axel Börsch-Supan & Guido Tabellini, 2001. "Would you like to shrink the welfare state? A survey of European citizens," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 7-50, 04.
- Guidolin, Massimo & La Ferrara, Eliana, 2004.
"Diamonds are Forever, Wars are Not: Is Conflict Bad for Private Firms?,"
CEPR Discussion Papers
4668, C.E.P.R. Discussion Papers.
- Massimo Guidolin & Eliana La Ferrara, 2007. "Diamonds Are Forever, Wars Are Not: Is Conflict Bad for Private Firms?," American Economic Review, American Economic Association, vol. 97(5), pages 1978-1993, December.
- Massimo Guidolin & Eliana La Ferrara, 2006. "Diamonds are forever, wars are not. Is conflict bad for private firms?," Working Papers 2005-004, Federal Reserve Bank of St. Louis.
- Margaret C. Levenstein & Valerie Y. Suslow, 2002. "What Determines Cartel Success?," UMASS Amherst Economics Working Papers 2002-01, University of Massachusetts Amherst, Department of Economics.
- Bart J. Wilson & Stanley S. Reynolds, 2005. "Market Power And Price Movements Over The Business Cycle," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 145-174, 06.
- Harrison, Alan & Stewart, Mark, 1989. "Cyclical Fluctuations in Strike Durations," American Economic Review, American Economic Association, vol. 79(4), pages 827-41, September.
- Griffin, James M, 1985. "OPEC Behavior: A Test of Alternative Hypotheses," American Economic Review, American Economic Association, vol. 75(5), pages 954-63, December.
- Kennan, John & Wilson, Robert, 1989. "Strategic Bargaining Models and Interpretation of Strike Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S87-130, Supplemen.
- Robert W. Staiger & Frank A. Wolak, 1992. "Collusive Pricing with Capacity Constraints in the Presence of Demand Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 203-220, Summer.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpio:0511016. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA)
If references are entirely missing, you can add them using this form.