The Effect of Explicit Communication on pricing: Evidence from the Collapse of a Gasoline Cartel

Robert Clark and Jean-François Houde

Journal of Industrial Economics, 2014, vol. 62, issue 2, 191-228

Abstract: type="main">

We study the collapse of collusion in Québec's retail gasoline market following a Competition Bureau investigation, and show that it involved two empirical regularities: high margins, and asymmetric price adjustments. Using weekly, station-level prices we test whether collusion was successful, and whether asymmetric adjustments were part of the cartel's strategy. We do so in the markets targeted by the investigation, and in markets throughout the province with similar pre-collapse pricing (cyclical markets). Our results suggest that stations in both target and cyclical markets adjusted pricing following the announcement: margins fell (by 30%/15% in target/cyclical markets), and adjustments became more symmetric.

Date: 2014
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