IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwple/9503001.html
   My bibliography  Save this paper

Identifying Participants in a Price-fixing Conspiracy: Output and Market Share Tests Reexamined

Author

Listed:
  • Mehmet E. Karaaslan

    (Alfred University)

Abstract

: If there is a cartel agreement among a subset of firms in an industry, it should be predicted that all firms in that industry will increase prices. Nevertheless, industry prices alone should not indicate that a particular firm is guilty of that conspiracy. According to the output test and its market share variant if the output or the market share of the firm that claims to be innocent in the collusive activity rises in response to the price increase, that firm's claim should be accepted as true. Using a collusive variant of the dominant firm model, this paper shows that these are not robust tests to reveal innocence or guilt, and characterizes cases where they may pardon a guilty firm (Type I error) or indict an innocent firm (Type II error). This paper also shows that a market share test can not be used to prove a dominant firm's intent for predatory pricing JEL Classification: G18, L41, K42 Keywords: Dominant firm, collusion, predatory pricing, output test, market share test, antitrust

Suggested Citation

  • Mehmet E. Karaaslan, 1995. "Identifying Participants in a Price-fixing Conspiracy: Output and Market Share Tests Reexamined," Law and Economics 9503001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwple:9503001
    Note: Mac/Word 5.1 document, encoded BinHex using StuffIt 1.5 Mac Utility, 18 pages, Figure 1 not included. To request the figure, send e-mail to karaasla@bigvax.alfred.edu with your fax number.
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/le/papers/9503/9503001.pdf
    Download Restriction: no
    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/le/papers/9503/9503001.ps.gz
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gaskins, Darius Jr., 1971. "Dynamic limit pricing: Optimal pricing under threat of entry," Journal of Economic Theory, Elsevier, vol. 3(3), pages 306-322, September.
    2. Besanko, David & Spulber, Daniel F, 1989. "Antitrust Enforcement under Asymmetric Information," Economic Journal, Royal Economic Society, vol. 99(396), pages 408-425, June.
    3. Baron, David P, 1973. "Limit Pricing, Potential Entry, and Barriers to Entry," American Economic Review, American Economic Association, vol. 63(4), pages 666-674, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Frank Scott, 2000. "Great School Milk Conspiracies Revisited," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(3), pages 325-341, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Flavio Toxvaerd, 2017. "Dynamic limit pricing," RAND Journal of Economics, RAND Corporation, vol. 48(1), pages 281-306, March.
    2. Semmler, Willi & Di Bartolomeo, Giovanni & Minooei Fard, Behnaz & Braga, Joao Paulo, 2022. "Limit pricing and entry game of renewable energy firms into the energy sector," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 179-190.
    3. Berck, Peter & Perloff, Jeffrey M., 1988. "The dynamic annihilation of a rational competitive fringe by a low-cost dominant firm," Journal of Economic Dynamics and Control, Elsevier, vol. 12(4), pages 659-678, November.
    4. Ramser, Hans Jürgen, 1975. "Neuere Ansätze in der Theorie der Firma und ihre wettbewerbspolitischen Implikationen," Discussion Papers, Series I 70, University of Konstanz, Department of Economics.
    5. Barnes-Regueiro, Francisco & Leach, Matthew & Ruth, Matthias, 2002. "The Mexican energy sector: integrated dynamic analysis of the natural gas/refining system," Energy Policy, Elsevier, vol. 30(9), pages 767-779, July.
    6. Stephen W. Salant, 1977. "Staving off the backstop: dynamic limit-pricing with a kinked demand curve," International Finance Discussion Papers 110, Board of Governors of the Federal Reserve System (U.S.).
    7. Cumbul, Eray & Virág, Gábor, 2018. "Multilateral limit pricing in price-setting games," Games and Economic Behavior, Elsevier, vol. 111(C), pages 250-273.
    8. Zhiyong Liu & Yue Qiao, 2012. "Abuse of Market Dominance Under China’s 2007 Anti-monopoly Law: A Preliminary Assessment," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 41(1), pages 77-107, August.
    9. Roldan, Flavia, 2011. "Covert networks and antitrust policy," IESE Research Papers D/932, IESE Business School.
    10. Roldan, Flavia, 2010. "Collusive networks in market-sharing agreements under the presence of an antitrust authority," IESE Research Papers D/854, IESE Business School.
    11. David G. Blanchflower & Neil Millward & Andrew J. Oswald, 1989. "Unionization and Employment Behavior," NBER Working Papers 3180, National Bureau of Economic Research, Inc.
    12. Robert M. Feinberg & Minsoo Park, 2015. "Deterrence Effects Of Korean Antitrust Enforcement On Producer Prices And Profit Margins," Journal of Competition Law and Economics, Oxford University Press, vol. 11(4), pages 917-933.
    13. Jean Jaskold Gabszewicz, 1979. "Théories de la concurrence imparfaite : illustrations récentes de thèmes anciens," Working Papers hal-01527449, HAL.
    14. Sylvain Chassang & Kei Kawai & Jun Nakabayashi & Juan Ortner, 2019. "Data Driven Regulation: Theory and Application to Missing Bids," Boston University - Department of Economics - Working Papers Series WP2019-04, Boston University - Department of Economics.
    15. David BARTOLINI & Alberto ZAZZARO, 2008. "Are Antitrust Fines Friendly to Competition? An Endogenous Coalition Formation Approach to Collusive Cartels," Working Papers 325, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    16. Ángel L. López & Xavier Vives, 2019. "Overlapping Ownership, R&D Spillovers, and Antitrust Policy," Journal of Political Economy, University of Chicago Press, vol. 127(5), pages 2394-2437.
    17. Gautam Gowrisankaran & Thomas J. Holmes, 2000. "Do mergers lead to monopoly in the long run? Results from the dominant firm model," Staff Report 264, Federal Reserve Bank of Minneapolis.
    18. Schankerman, Mark & Pakes, Ariel, 1986. "Estimates of the Value of Patent Rights in European Countries during the Post-1950 Period," Economic Journal, Royal Economic Society, vol. 96(384), pages 1052-1076, December.
    19. Joseph E. Harrington, 2005. "Optimal Cartel Pricing In The Presence Of An Antitrust Authority," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 145-169, February.
    20. Sami, Hind, 2009. "Random monitoring in financing relationships," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(2), pages 239-252, May.

    More about this item

    Keywords

    dominant firm; collusion; predatory pricing; output test; market share test; antitrust;
    All these keywords.

    JEL classification:

    • K - Law and Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwple:9503001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.