Business Economics and Public Policy Papers
Document Type
Journal Article
Date of this Version
11-2006
Publication Source
International Journal of Industrial Organization
Volume
24
Issue
6
Start Page
1185
Last Page
1212
DOI
10.1016/j.ijindorg.2006.04.012
Abstract
This paper characterizes collusive pricing patterns when buyers may detect the presence of a cartel. Buyers are assumed to become suspicious when observed prices are anomalous. We find that the cartel price path is comprised of two phases. During the transitional phase, price is generally rising and relatively unresponsive to cost shocks. During the stationary phase, price responds to cost but is much less sensitive than under non-collusion or simple monopoly; a low price variance may then be a collusive marker. Compared to when firms do not collude, cost shocks take a longer time to pass-through to price.
Copyright/Permission Statement
© 2006. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Recommended Citation
Harrington, J. E., & Chen, J. (2006). Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection. International Journal of Industrial Organization, 24 (6), 1185-1212. http://dx.doi.org/10.1016/j.ijindorg.2006.04.012
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Date Posted: 27 November 2017