Detecting Collusion in Spatially Differentiated Markets

Matthias Firgo and Agnes Kügler

No 479, WIFO Working Papers from WIFO

Abstract: The empirical literature on mergers, market power and collusion in differentiated markets has mainly focused on methods relying on output and/or panel data. In contrast to this literature we suggest a novel approach that allows for the detection of collusive behaviour among a group of firms making use of information on the spatial structure of horizontally differentiated products. By estimating best response functions using a spatial econometrics approach, we focus on differences in the strategic interaction in pricing between different groups of firms as well as on differences in price levels. We apply our method to the market for ski lift tickets using a unique data set on ticket prices and detailed resort-specific characteristics covering all ski resorts in Austria. We show that prices of ski resorts forming alliances are higher and increase with the size and towards the spatial center of an alliance. Strategic interaction in pricing is higher within than outside alliances. All results are in line with the findings of theoretical models on collusion in horizontally differentiated markets.

Keywords: tacit collusion; strategic alliances; spatial differentiation; ski lift ticket prices (search for similar items in EconPapers)
Pages: 50 pages
Date: 2014-10
New Economics Papers: this item is included in nep-com, nep-ind and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://www.wifo.ac.at/wwa/pubid/47491 abstract (text/html)

Related works:
Working Paper: Detecting Collusion in Spatially Differentiated Markets (2014)
Working Paper: Detecting Collusion in Spatially Differentiated Markets (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:wfo:wpaper:y:2014:i:479

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