Monday, November 27, 2017

Competition, Collusion and Spatial Sales Patterns - Theory and Evidence

Matthias Hunold, Düsseldorf Institute for Competition Economics (DICE), Kai Hüschelrath, Centre for European Economic Research (ZEW), Ulrich Laitenberger, Telecom ParisTech; Centre for European Economic Research (ZEW); KU Leuven - Department of Managerial Economics, Strategy, and Innovation, and Johannes Muthers, University of Würzburg - Institute of Economics and Social Sciences offer Competition, Collusion and Spatial Sales Patterns - Theory and Evidence.

ABSTRACT: We study competition in markets with significant transport costs and capacity constraints. We compare the cases of price competition and coordination in a theoretical model and find that when firms compete, they more often serve more distant customers that are closer to plants of competitors. By means of a rich micro-level data set of the cement industry in Germany, we provide empirical evidence in support of this result. Controlling for other potentially confounding factors, such as the number of production plants and demand, we find that the transport distances between suppliers and customers were on average significantly lower in cartel years than in non-cartel years.

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