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Tacit collusion with imperfect monitoring in the Canadian manufacturing industry: an empirical study

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  • Marcelo Resende
  • Rodrigo Zeidan

Abstract

This article undertakes a cross-sectoral analysis of a salient empirical implication of the model of tacit collusion advanced by Abreu, Pearce, and Stachetti (1986). Specifically, we assess the prevalence of a first-order Markovian process for alternating between price wars and collusive periods through nonparametric tests. The analysis focuses on 30 different industries in Canada. The evidence provides weak support for optimal collusion in one industry, which is consistent with the idea that such kind of collusive arrangements is unusual, or, if collusion is all too common, that price wars as deviations from collusion are rare.

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  • Marcelo Resende & Rodrigo Zeidan, 2016. "Tacit collusion with imperfect monitoring in the Canadian manufacturing industry: an empirical study," Applied Economics, Taylor & Francis Journals, vol. 48(8), pages 701-711, February.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:8:p:701-711
    DOI: 10.1080/00036846.2015.1085643
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