CIRJE-F-359 | "Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection" |
Author Name | Harrington, Joseph E. Jr. and Joe Chen |
Date | August 2005 |
Full Paper | PDF file@ |
Remarks | Subsequently published in International Journal of Industrial Organization, 24(6), pp1185-1212, 2006. |
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. |