How Product Innovation Can Affect Price Collusion
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How Product Innovation Can Affect Price Collusion
Chapman UniversityChapman University Digital CommonsESI Working PapersEconomic Science Institute42949How Product Innovation Can Affect Price Collusion How Product Innovation Can Affect Price CollusionnAndrew Smythchapman Univtriity, smyth0>clupman.eduFollow this and additional works at: https://digitalcommons.chapman.edu/esi working^papersPart of the Econometrics Commons, Economic Theory Commons, and the Other EconomicsCommonsRecommended CitationSmyth, A. (2017). How product innovation can affec How Product Innovation Can Affect Price Collusiont price collusion. ESI Working Paper 17-26. Retrieved from https://digitakommoiM.chapman.edu/esl_wotklng_papers/239Ihli Article Is. brought to you torHow Product Innovation Can Affect Price Collusion
free and open access by the Economic Soencc Institute at Cluptnon LVUvemty Digital (kimmonc. It has. beat accepted for inclusion in ESI Working PaperChapman UniversityChapman University Digital CommonsESI Working PapersEconomic Science Institute42949How Product Innovation Can Affect Price Collusion How Product Innovation Can Affect Price Collusion!How Product Innovation Can Affect Price CollusionCommentsWorking Paper 17-26Ibis article is available at chapman University Digital Commoner https:.'.'digitalcommoiK.chapman.c Ju/esi working papert/239How Product Innovation Can Affect Price Collusion*Andrew Smylli'42949AbstractPrice conspiracies ap How Product Innovation Can Affect Price CollusionfM'ar endemic ill many markets. This paper conjectures that low expected returns from product innovation can affect price collusion in certain marketsHow Product Innovation Can Affect Price Collusion
. This conjecture is tested and supported by both archival and experimental data. In particular, average market, prices in low innovation experiments Chapman UniversityChapman University Digital CommonsESI Working PapersEconomic Science Institute42949How Product Innovation Can Affect Price Collusion How Product Innovation Can Affect Price Collusionnovation experiments.Keywords: price collusion, product innovation, antitrust, experimental economicsJEL: L410, Ll(X), 0330. C920• I Am ftrntefnl tn the XfirhAel .J. Pierre Fellowship And the Frnnnmic Science Institute for fnndinfr. 1 thnnk Mark Isaac. Gary 1-buruiw. Curtuey Model. Bari Wilson, arid How Product Innovation Can Affect Price Collusion seminar participariU- al Florida Stale. Chapman. Marquette. MASsnchiisctt.s Amherst, And the Tx>ndon F.xperimrmtnl Workshop for helpful comments. NatHow Product Innovation Can Affect Price Collusion
urally, Any errors Are my own.t DcpArt.ment of Emnnmicạ, Marquette University, Milwaukee. WI 53201,nniirt>t>ĩ..tm\ithfhntinỊtiefỉ/'..<-/iuElectronic cChapman UniversityChapman University Digital CommonsESI Working PapersEconomic Science Institute42949How Product Innovation Can Affect Price Collusion How Product Innovation Can Affect Price Collusion those of our comfM't itors.. .The only way to get a buyer is to sell at a lower price. Thus comfjctitors may think that the only way to make it is to get together and fix prices.’"Folding box executive who participated in a price conspiracy (quoted in Sonnenfeld and Lawrence. 1978)There are price c How Product Innovation Can Affect Price Collusiononspiracies in some markets (school milk, concrete, paper products) year after year and even decade after decade. These markets typically lack ‘killerHow Product Innovation Can Affect Price Collusion
’ products that “confer market leadership and thus diminish or eliminate actual or potential rivals’" (Evans and Schmalenscc, 2002). This paper considChapman UniversityChapman University Digital CommonsESI Working PapersEconomic Science Institute42949How Product Innovation Can Affect Price Collusion How Product Innovation Can Affect Price Collusiondrums of technological stasis.Given its illegality, firms arc less likely to attempt price collusion in markets where they can use product innovation to soften or escape competition. As Wallace (1937) comments: “(W)hcrc there is a large field for profitable development of new variations of the basic How Product Innovation Can Affect Price Collusion product, it seems unlikely that oligopolists would follow policies appropriate to more or less permanent division of the market in fixed proportions.How Product Innovation Can Affect Price Collusion
" However, in markets where product innovation appears unlikely to generate "sufficient’’ expected returns, firms may turn to price manipulation as anChapman UniversityChapman University Digital CommonsESI Working PapersEconomic Science Institute42949How Product Innovation Can Affect Price Collusion How Product Innovation Can Affect Price Collusionx aide size of the return from innovation may be low. or the probability of successfully innovating may be low, or lx>th may be true. Second, successful innovators may not actually obtain much of the return from innovation ex post (appropriability may be low). This pa{jer focuses on the first reason How Product Innovation Can Affect Price Collusion ami posits that, ceteris paribus, price conspiracies are most likely in markets where the ex aide expected return from product1Chapman UniversityChapman University Digital CommonsESI Working PapersEconomic Science Institute42949How Product Innovation Can Affect Price CollusionChapman UniversityChapman University Digital CommonsESI Working PapersEconomic Science Institute42949How Product Innovation Can Affect Price CollusionGọi ngay
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