Asymmetric Pricing Caused by Collusion

Martin Obradovits ()

MPRA Paper from University Library of Munich, Germany

Abstract: In many markets, empirical evidence suggests that positive production cost shocks are transmitted more quickly and fully to final prices than negative ones. This article explains asymmetric price adjustment caused by firms imperfectly colluding on supra-competitive price levels. While positive cost shocks are transmitted instantaneously, negative price adjustments only occur once aggregate market demand turns out unexpectedly low. In equilibrium, this can be supported whenever demand is sufficiently stable, and negative cost shocks are not too large.

Keywords: asymmetric price adjustment; asymmetric pricing; rockets and feathers; collusion; price transmission (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 (search for similar items in EconPapers)
Date: 2014-09-25
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Asymmetric Pricing Caused by Collusion (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:58889

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