Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104396
Authors: 
Andreoli-Versbach, Patrick
Franck, Jens-Uwe
Year of Publication: 
2013
Series/Report no.: 
Munich Discussion Paper 2013-9
Abstract: 
This article studies dynamic pricing strategies in the Italian gasoline market before and after the market leader unilaterally announced its commitment to adopt a sticky-pricing policy. Using daily Italian firm level prices and weekly average EU prices, we show that the effect of the new policy was twofold. First, it facilitated price alignment and coordination on price changes. After the policy change, the observed pricing pattern shifted from cost-based to sticky-leadership pricing. Second, using a dif-in-dif estimation and a synthetic control group, we show that the causal effect of the new policy was to significantly increase prices through sticky-leadership pricing. Our paper highlights the importance of price-commitment by a large firm in order to sustain (tacit) collusion.
Subjects: 
tacit collusion
leadership pricing
sticky pricing
endogenous commitment
JEL: 
K21
K42
L13
L41
L71
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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