Abstract
When a group of firms colludes on price, the industry price will rise even when there are some firms that do not participate in the conspiracy. If the government or private parties file antitrust suits, the noncolluders face the problem of establishing their innocence since their prices rise along with those of the colluders. We propose a simple output test. Under various models of oligopoly pricing—Bertrand, Cournot, and Stackelberg—we show that the colluders restrict their output while the noncolluders take advantage of the higher price by expanding their outputs. Thus, distinguishing between colluders and noncolluders involves simply observing the output behavior of the industry members.
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The authors appreciate the support of the Public Policy Research Center at the University of Florida. We regret that B&R Associates is purely imaginary as is the industry.
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Blair, R.D., Romano, R.E. Proof of nonparticipation in a price fixing conspiracy. Rev Ind Organ 4, 101–117 (1989). https://doi.org/10.1007/BF02284663
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DOI: https://doi.org/10.1007/BF02284663