Collusion and price dispersion

While there are suggestions in applied cartel studies that price dispersion changes when cartelization of a market occurs, there are few theoretical or empirical analyses of this effect. This article surveys the thin economic literature on the link between overt collusion and price dispersion. Formal theories and observation of cartel behaviour suggest that during successfully collusive periods prices become less variable and more negatively skewed compared to relatively competitive periods. Four empirical studies of cartels verify these predictions.