Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Tuesday, September 24, 2013

Actions Speak Louder than Words: Econometric Evidence to Target Tacit Collusion in Oligopolistic Markets

Patrick Andreoli-Versbach (International Max Planck Research School for Competition and Innovation, Munich Center for Innovation and Entrepreneurship Research and Ludwig-Maximilians-Universitat Munchen) and Jens-Uwe Franck (Ludwig-Maximilians-Universitat Munchen) argue that Actions Speak Louder than Words: Econometric Evidence to Target Tacit Collusion in Oligopolistic Markets.

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.

http://lawprofessors.typepad.com/antitrustprof_blog/2013/09/actions-speak-louder-than-words-econometric-evidence-to-target-tacit-collusion-in-oligopolistic-mark.html

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