Abstract
Tacit collusion between National Power and PowerGen, the dominant generators in England and Wales for most of the 1990s, was widely speculated but was not definitively proven. In the event of a legal determination, the best available evidence is a test of suspicious patterns of bidding behavior. The methodology has two stages: the first is to show that the suspects behave “differently” from the rest, which are assumed competitive; the second stage is to ask whether or not strategies of suspects affect one another. Results: the impact of suspects on the aggregate bid function can not be explained away by costs and common market events, and a seemingly unrelated regression (SUR) on strategies of the suspects reveals bid inter-dependence and co-ordination on demand trends. A quarter of the dynamic indicators support an inference of tacit collusion. The existence of multiple equilibria in supergames, however, prevents a conclusive statement.
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Macatangay, R.E.A. Tacit Collusion in the Frequently Repeated Multi-Unit Uniform Price Auction for Wholesale Electricity in England and Wales. European Journal of Law and Economics 13, 257–273 (2002). https://doi.org/10.1023/A:1014730803412
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DOI: https://doi.org/10.1023/A:1014730803412