Collusion and Price Dispersion
Purdue University, Department Staff Paper No. 10-14
9 Pages Posted: 30 Aug 2005
Date Written: March 20, 2005
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: Suggested Citation