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on Law and Economics |
| By: | Andreoli-Versbach, Patrick; Franck, Jens-Uwe |
| Abstract: | Tacit collusion reduces welfare comparably to explicit collusion but remains mostly unaddressed by antitrust enforcement which greatly depends on evidence of explicit communication. We propose to target specific elements of firms’ behavior that facilitate tacit collusion by providing quantitative evidence that links these actions to an anticompetitive market outcome. We apply our approach to incidents on the Italian gasoline market where the market leader unilaterally announced its commitment to a policy of sticky pricing and large price changes which facilitated price alignment and coordination of price changes. Antitrust policy has to distinguish such active promotion of a collusive strategy from passive (best response) alignment. Our results imply the necessity of stronger legal instruments which target unilateral conduct that aims at bringing about collusion. |
| Keywords: | antitrust law; tacit collusion; oligopolistic competition; gasoline market |
| JEL: | K21 K42 L13 L71 L41 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:16179&r=law |
| By: | Andreoli-Versbach, Patrick; Franck, Jens-Uwe |
| Abstract: | This article studies dynamic pricing strategies in the Italian gasoline market before and after the market leader unilaterally announced its commitment to adopt a sticky-pricing policy. Using daily Italian firm level prices and weekly average EU prices, we show that the effect of the new policy was twofold. First, it facilitated price alignment and coordination on price changes. After the policy change, the observed pricing pattern shifted from cost-based to sticky-leadership pricing. Second, using a dif-in-dif estimation and a synthetic control group, we show that the causal effect of the new policy was to significantly increase prices through sticky-leadership pricing. Our paper highlights the importance of price-commitment by a large firm in order to sustain (tacit) collusion. |
| Keywords: | tacit collusion; leadership pricing; sticky pricing; endogenous commitment |
| JEL: | K21 K42 L13 L41 L71 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:16182&r=law |