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Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards
Resource type
Authors/contributors
- Knittel, Christopher R. (Author)
- Stango, Victor (Author)
Title
Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards
Abstract
We test whether a nonbinding price ceiling may serve as a focal point for tacit collusion, using data from the credit card market during the 1980's. Our empirical model can distinguish instances when firms match a binding ceiling from instances when firms tacitly collude at a nonbinding ceiling. The results suggest that tacit collusion at nonbinding state-level ceilings was prevalent during the early 1980's, but that national integration of the market reduced the sustainability of tacit collusion by the end of the decade. The results highlight a perverse effect of price regulation.
Publication
American Economic Review
Volume
93
Issue
5
Pages
1703-1729
Date
2003-12
Citation
Knittel, C. R., & Stango, V. (2003). Price Ceilings as Focal Points for Tacit Collusion: Evidence from Credit Cards. American Economic Review, 93, 1703–1729.
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