Does Parallel Behavior Provide Some Evidence of Collusion?

Buccirossi Paolo
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Buccirossi Paolo: LEAR – Laboratorio di economia, antitrust regolamentazione, Rome

Review of Law & Economics, 2006, vol. 2, issue 1, 85-102

Abstract: Antitrust authorities often consider parallel pricing and market share stability to be clues of illegal collusion. To analyze whether this inference is correct, I develop a model of price competition with differentiated products in which demand and costs vary over time. In many cases parallel pricing does not distinguish between a competitive and a collusive outcome. However, in some cases perfect parallel pricing is compatible only with a competitive equilibrium, and therefore provides some evidence that firms did not collude. I also show that the competitive equilibrium is characterized by a higher market share stability than a collusive equilibrium.

Date: 2006
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DOI: 10.2202/1555-5879.1027

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