Antitrust & Competition Policy Blog

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University of Florida
Levin College of Law

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Friday, January 24, 2014

PRICE HYSTERESIS AFTER ANTITRUST ENFORCEMENT: EVIDENCE FROM SPANISH FOOD MARKETS

Jose Manuel Ordonez-de-Haro (University of Malaga) and Jose Luis Torres (University of Malaga) describe PRICE HYSTERESIS AFTER ANTITRUST ENFORCEMENT: EVIDENCE FROM SPANISH FOOD MARKETS.

ABSTRACT: This article provides additional empirical evidence regarding the effects of antitrust enforcement on consumer prices in prosecuted markets. We focus on the effect of the Spanish Competition Authority investigation and prosecution of several Spanish food associations for alleged collective price recommendations against the Spanish Competition Act by analyzing the subsequent price behavior for their respective products. The results show that antitrust enforcement may lead to a reduction in food price volatility and, in some cases, may even cause long periods of price rigidity in the concerned markets. We consider that observed hysteresis in prices may be due to the disruption of the mechanism played by associations in the transmission of information about how to pass on the cost shocks to their customers or, importantly, to the change in pricing behavior by keeping prices above competitive levels, but stable enough to minimize the risk of another antitrust intervention. This strategic conduct would be in line with the findings in the theoretical literature about collusion in the presence of competition authorities.

http://lawprofessors.typepad.com/antitrustprof_blog/2014/01/price-hysteresis-after-antitrust-enforcement-evidence-from-spanish-food-markets.html

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