Abstract

Antitrust authorities often consider parallel pricing and market share stability to be clues of illegal collusion. To analyze whether this inference is correct, I develop a model of price competition with differentiated products in which demand and costs vary over time. In many cases parallel pricing does not distinguish between a competitive and a collusive outcome. However, in some cases perfect parallel pricing is compatible only with a competitive equilibrium, and therefore provides some evidence that firms did not collude. I also show that the competitive equilibrium is characterized by a higher market share stability than a collusive equilibrium.

Submitted: April 15, 2005 · Accepted: November 16, 2005 · Published: July 27, 2006

Recommended Citation

Buccirossi, Paolo (2006) "Does Parallel Behavior Provide Some Evidence of Collusion?," Review of Law & Economics: Vol. 2 : Iss. 1, Article 5.
Available at: http://www.bepress.com/rle/vol2/iss1/art5