Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection
This paper characterizes collusive pricing patterns when buyers may detect the presence of a cartel. Buyers are assumed to become suspicious when observed prices are anomalous. We find that the cartel price path is comprised of two phases. During the transitional phase, price is generally rising and relatively unresponsive to cost shocks. During the stationary phase, price responds to cost but is much less sensitive than under non-collusion or simple monopoly. The length of the transition phase is decreasing in the variance of cost shocks. It is also shown that the cartel price path may overshoot its long-run level so that price converges from above.
Year of publication: |
2002-04
|
---|---|
Authors: | Jr, Joseph E Harrington ; Chen, Joe |
Institutions: | Department of Economics, Johns Hopkins University |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Post-Cartel Pricing during Litigation
Jr, Joseph E Harrington, (2002)
-
Organizational Structure and Perpetual Innovation: A Computational Model of a Retail Chain
Chang, Myong-Hun, (2000)
-
A Theory of Rigid Extremists and Flexible Moderates With An Empirical Application To The US Congress
Blomberg, S Brock, (2000)
- More ...