Sorting The Collusive Goats from The Consciously Parallel Sheep

By Aaron M. Panner

This comment distinguishes oligopolistic price coordination – tacit collusion – from competitive conscious parallelism. The key characteristic of tacit collusion is that the success of a price hike depends on rivals’ adoption of a parallel increase; otherwise, competitive losses will force the price leader to retract the increase. But certain price increases may reflect competitive pricing strategies designed to increase prices for customer segments and services for which demand is relatively inelastic. The success of such a strategy may not depend on rivals’ response, and adoption of the strategy by competitors after it has proven successful may reflect competitive pressure, not its absence.

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