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Does Parallel Behavior Provide Some Evidence of Collusion?

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  • Buccirossi Paolo

    (LEAR – Laboratorio di economia, antitrust regolamentazione, Rome)

Abstract

Antitrust authorities often consider parallel pricing and market share stability to be clues of illegal collusion. To analyze whether this inference is correct, I develop a model of price competition with differentiated products in which demand and costs vary over time. In many cases parallel pricing does not distinguish between a competitive and a collusive outcome. However, in some cases perfect parallel pricing is compatible only with a competitive equilibrium, and therefore provides some evidence that firms did not collude. I also show that the competitive equilibrium is characterized by a higher market share stability than a collusive equilibrium.

Suggested Citation

  • Buccirossi Paolo, 2006. "Does Parallel Behavior Provide Some Evidence of Collusion?," Review of Law & Economics, De Gruyter, vol. 2(1), pages 85-102, July.
    • Handle: RePEc:bpj:rlecon:v:2:y:2006:i:1:n:5
    DOI: 10.2202/1555-5879.1027
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. Green, Edward J & Porter, Robert H, 1984. "Noncooperative Collusion under Imperfect Price Information," Econometrica, Econometric Society, vol. 52(1), pages 87-100, January.
    3. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-465, Autumn.
    4. repec:bla:econom:v:56:y:1989:i:223:p:295-310 is not listed on IDEAS
    5. Jacquemin, Alexis & Slade, Margaret E., 1989. "Cartels, collusion, and horizontal merger," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 7, pages 415-473, Elsevier.
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    Cited by:

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    2. de Mesnard, Louis, 2009. "Is the French mobile phone cartel really a cartel?," International Journal of Production Economics, Elsevier, vol. 122(2), pages 663-677, December.
    3. Sylwester Bejger, 2015. "Testing Parallel Pricing Behavior in the Polish Wholesale Fuel Market: an ARDL – Bound Testing Approach," Dynamic Econometric Models, Uniwersytet Mikolaja Kopernika, vol. 15, pages 111-128.
    4. Juan Jiménez & Jordi Perdiguero, 2012. "Does Rigidity of Prices Hide Collusion?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 41(3), pages 223-248, November.
    5. Tabaghdehi, Seyedeh Asieh H. & Hunter, John, 2020. "Long-run price behaviour in the gasoline market - The role of exogeneity," Journal of Business Research, Elsevier, vol. 116(C), pages 620-627.
    6. Constantin BELU, 2012. "Pricing Patterns And Implications For Competition Policy," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 10, pages 97-103, December.

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