Collusion and Price Dispersion

Purdue University, Department Staff Paper No. 10-14

9 Pages Posted: 30 Aug 2005

See all articles by John M. Connor

John M. Connor

Purdue University; American Antitrust Institute (AAI)

Date Written: March 20, 2005

Abstract

While there are suggestions in applied cartel studies that price dispersion changes when cartelization of a market occurs, there are few theoretical or empirical analyses of this effect. This paper surveys the thin economic literature on the link between overt collusion and price dispersion. Formal theories and observation of cartel behavior suggest that during successfully collusive periods prices become less variable and more negatively skewed compared to relatively competitive periods. Four empirical studies of cartels verify these predictions.

Keywords: collusion, cartel, price dispersion

JEL Classification: D44, L12, L41

Suggested Citation

Connor, John M., Collusion and Price Dispersion (March 20, 2005). Purdue University, Department Staff Paper No. 10-14. Available at SSRN: https://ssrn.com/abstract=787849 or http://dx.doi.org/10.2139/ssrn.787849

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