Can industry regulators learn collusion structures from information-efficient asset markets?

Alexander Zimper and Shakill Hassan

Economics Letters, 2012, vol. 116, issue 1, 1-4

Abstract: This note combines a dynamic industrial organization model, in which an industry is subject to exogenous processes of market-size and collusion structure, with a consumption-based asset pricing model for the shares in the industry’s firms. Three main findings emerge for our model under the assumption of information-efficient asset markets. First, the volatility of a firm’s share price is exclusively driven by the volatility of the industry’s market-size. Second, the volatility of a firm’s price-dividend ratio is exclusively driven by the volatility of the industry’s collusion structure whereby high (resp. low) ratios indicate less (resp. more) collusion. Third, for non-volatile collusion structures the price-dividend ratio is constant across different collusion structures.

Keywords: Cournot interaction; Collusion; Price-dividend ratio; Consumption-based asset pricing (search for similar items in EconPapers)
JEL-codes: G12 L10 L50 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:116:y:2012:i:1:p:1-4

DOI: 10.1016/j.econlet.2012.01.002

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