Distinguishable patterns of competition, collusion, and parallel action
Name
2003-006.pdf
Size
313.34 KB
Format
Adobe PDF
Checksum (MD5)
b6f66db077508a6fc8049e0e3f4a70b6
Author(s)
Smith, James L.
Date Issued
2003
Publisher
MIT Center for Energy and Environmental Policy Research
Series/Report no.
MIT-CEEPR (Series) ; 03-006WP.
Abstract
Alternative market structures are distinguishable by the degree of parallel action exhibited by producers. We show that the correlation between output levels varies systematically with the degree of interdependence among firms, and establish an ordering among alternative behavioral hypotheses (Cournot, Stackelberg, Edgeworth/Bertrand, collusion, and perfect competition). Because the ordering is invariant to the values of background parameters, statistical tests of market conduct may be possible even when the slopes of the demand curve and marginal cost curves are unknown. An application to the world oil market finds strong evidence of collusive behavior among OPEC members, but not elsewhere.
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