This paper investigates the size of penalties required to deter cartel formation. Allowing the penalty to be increasing in duration within the infinitely repeated game framework, penalties do not need to be as severe as previous research would suggest.

The two central pricing rules contained in most antitrust laws are prohibitions of below-cost pricing and prohibitions of discriminatory pricing. This article shows that the rule against discriminatory pricing may actually induce firms to charge exclusionary below-cost prices, even in the...

Harrington (2004) shows that conspirators can have incentives to maintain high prices after the cartel’s discovery to reduce damages they are likely to pay. We exploit the existence of a discovered retail gasoline price-fixing cartel in the province of Quebec to test this theory. The empirical...

This note investigates the effects of a large horizontal merger on the shape of the 1-to-12 h price menus offered by parking garages in Paris. The merger caused low-end prices to increase proportionally more than high-end prices. This results in larger discounts on longer hours and hence in more...

We analyze a model of competition in non-linear pricing under complete information. Among the equilibria of the game, we focus on the truthful equilibrium and the equilibrium that is Pareto dominant for the firms. These coincide when there are only two firms, but differ with three or more firms....

Most quantitative tools for assessing competitive effects of mergers rely heavily on recapture ratios (also known as aggregate diversion ratios). Recapture ratios measure the proportion of customers switching away from a product that is captured by other products within the market rather than...

We show that, in general, consistent estimates of cost pass-through are not obtained from reduced-form regressions of price on cost. We derive a formal approximation for the bias that arises even under standard orthogonality conditions. We provide guidance on the conditions under which bias may...

In a linear oligopoly model with antitrust enforcement, the optimal cartel price converges to the competitive equilibrium price. The set of sustainable cartel prices does not shrink to the competitive price. We identify necessary conditions for this counter-intuitive convergence result.

Laitinen (1980) derives an input allocation model for a multiproduct firm that first maximizes revenue and second maximizes profit. While theoretically elegant, the model has never been formulated empirically because of the complexity of the model’s price-deflated terms. This paper derives the...

We examine retailer heterogeneity in price adjustment in UK supermarkets. Considerable variation in the price change frequency of identically bar-coded products among retail chains is found. Decomposition analysis suggests that price adjustment is evenly split between sales and reference prices...