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Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection

Joseph Harrington () and Joe Chen
Additional contact information
Joe Chen: Faculty of Economics, University of Tokyo

No CIRJE-F-359, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: 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.

Pages: 39 pages
Date: 2005-08
New Economics Papers: this item is included in nep-com
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Related works:
Journal Article: Cartel pricing dynamics with cost variability and endogenous buyer detection (2006) Downloads
Working Paper: Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection (2004) Downloads
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