David I. Rosenbaum and Supachat Sukharomana
"Oligopolistic pricing over the deterministic market demand cycle: Some evidence from U.S. Portland cement industry"
JEL codes:L13, L16, L61
Abstract:Haltiwanger and Harrington (1991) formulated a theory of self-enforcing collusion assuming a deterministic demand cycle. They predicted that under a self-enforcing non-cooperative pricing scheme, for any level of demand, the price in the rising part of the cycle would always be greater than the price in the falling part of the cycle. They also predicted that collusive profit should reach its peak before market demand. We test their predictions using data from the Portland cement industry. The hypotheses are tested using a tmulti-equation system, differentiating the boom and the bust periods from 1974 to 1989. The results support both Haltiwanger and Harrington's hypothesis.