Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/197838
Authors: 
Shcherbakov, Oleksandr
Wakamori, Naoki
Year of Publication: 
2017
Series/Report no.: 
Bank of Canada Staff Working Paper 2017-51
Abstract: 
Proportional reduction is a common cartel practice in which cartel members reduce their output proportionately. We develop a method to quantify this reduction relative to a benchmark market equilibrium scenario and relate the reduction to the traditional conduct parameter. Our measure is continuous, allowing us to have an intuitive interpretation as the "degree of collusion" and nesting the earlier models in the existing literature. Furthermore, our methodology addresses Corts' (1999) critique by estimating timevarying degree of collusion from a short panel of firm-level observations, exploiting firms' ex post heterogeneity. We illustrate the method using the Joint Executive Committee railroad cartel data.
Subjects: 
Econometric and statistical methods
Market structure and pricing
JEL: 
D22
L41
C36
Document Type: 
Working Paper

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