Date of this Version
International Journal of Industrial Organization
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.
© 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/
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
Date Posted: 27 November 2017