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CooperationV. Rivalry and factors facilitating collusion

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A perennial topic in industrial economics is collusion. Kwoka and Ravenscraft (1986) developed a model to measure the collusiveness of conjectures across industries as a function of intra-industry rivalry among leading firms. But extensive literature suggests that the degree of collusion may also depend upon underlying market characteristics. We modify the Kwoka and Ravenscraft model to account for this. Our results suggest that underlying market characteristics do matter. Intra-industry rivalry and conjectures vary with the level and stability of concentration, and to a lesser degree with product homogeneity.

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This research was supported, in part, by a grant from the American Philosophical Society. We thank Curtis Wagner and George Pascoe of the Federal Trade Commission for their invaluable assistance. We also greatly appreciate comments by James W. Brock, Douglas F. Greer, Joseph E. Harrington, Richard A. Miller, Stephen Martin, John T. Scott, and anonymous referees.

The representations and conclusions presented herein are those of the authors. They have not been adopted in whole or in part by the Federal Trade Commission, the Bureau of Economics, or any other entity within the Commission. The Federal Trade Commission's Disclosure Avoidance Officer has certified that the data included in the paper do not identify individual company line of business data.

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Rosenbaum, D.I., Manns, L.D. CooperationV. Rivalry and factors facilitating collusion. Rev Ind Organ 9, 823–838 (1994).

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