Center for Economic Research, Department of Economics, University of Minnesota
Recent work in game theory has shown that, in principle,
it may be possible for firms in an industry to form a self-policing
cartel to maximize their joint profits. This paper studies the
applicability of that work to empirical industrial organization. A
parametric model of a noncooperatively supported cartel is presented,
and the aspects of industry structure which would make such a
cartel viable are discussed. The model is shown to be estimable
my means of a multiple-equation switching-regression technique.
Thus it may be possible to subject a particular industry to a direct
test of collusive conduct. Such a test would complement the
reduced-form cross-industry regressions by which hypotheses about
collusion (in particular, Stigler's theory of oligopoly) have
previously been tested.
Green, E.J. and Porter, R.H., (1981), "Noncooperative Collusion Under Imperfect Price Information ", Discussion Paper No. 142, Center for Economic Research, Department of Economics, University of Minnesota.
Green, Edward J.; Porter, Robert H..
Noncooperative Collusion Under Imperfect Price Information.
Center for Economic Research, Department of Economics, University of Minnesota.
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