NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Collusion over the Business Cycle

Kyle Bagwell, Robert W. Staiger

NBER Working Paper No. 5056
Issued in March 1995
NBER Program(s):   EFG   IO

We present a theory of collusive pricing in markets subject to business cycle fluctuations. In the business cycle model that we adopt, market demand alternates stochastically between fast-growth (boom) and slow-growth (recession) phases. We provide a complete characterization of the most-collusive prices and show that: (1) the most-collusive prices may be procyclical (countercyclical) when demand growth rates are positively (negatively) correlated through time, and (2) the amplitude of the collusive pricing cycle is larger when the expected duration of boom phases decreases and when the expected duration of recession phases increases. We also offer a generalization of Rotemberg and Saloner's (1986) model, and interpret their findings in terms of transitory demand shocks that occur within broader business cycle phases.

download in pdf format
   (722 K)

email paper

This paper is available as PDF (722 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w5056

Published: Rand Journal of Economics, Vol. 28, no. 1, (Spring 1997), pp. 82-106. citation courtesy of

Users who downloaded this paper also downloaded these:
Fershtman and Pakes w6936 A Dynamic Oligopoly with Collusion and Price Wars
Carlton w1813 The Rigidity of Prices
Knittel and Lepore w12635 Tacit Collusion in the Presence of Cyclical Demand and Endogenous Capacity Levels
Rotemberg and Saloner w1412 A Supergame-Theoretic Model of Business Cycles and Price Wars During Booms
Rodrik w5160 Why is there Multilateral Lending?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us