Econometric Tools for Detection of Collusion Equilibrium in the Industry

Sylwester Bejger



The article presents the notion of detection of overt or tacit collusion equilibrium in the context of choice of the appropriate econometric method, which is determined by the amount of information that the observer possesses. There has been shown one of the collusion markers coherent with an equilibrium of the proper model of strategic interaction – the presence of structural disturbances in the price process variance for phases of collusion and competition. The Markov Switching Model with switching of variance regimes has been proposed as a proper theoretical method detecting that type of changes without prior knowledge of switching moments. In order to verify the effectiveness of the method it has been applied to a series of lysine market prices throughout and after termination of its manufacturers’ collusion.


explicit and tacit collusion, collusive equilibrium, cartel detection, lysine, price variance, Markov switching model

Full Text:



Abrantes-Metz, R., Froeb, L., Geweke, J., Taylor, C. (2006), A Variance Screen for Collusion, International Journal of Industrial Organization 24, 467–486. DOI:

Athey, S., Bagwell, K., Sanchirico, C. (2004), Collusion and Price Rigidity, Review of Economic Studies 71, 317–349. DOI:

Bejger, S. (2004), Identyfikacja, pomiar i ocena siły rynkowej podmiotów gospodarczych oraz stopnia konkurencyjności branż z wykorzystaniem metodologii teorii gier, (Identification, Measurement and Estimation of Market Power of the Firms and Degree of Competitiveness of the Industries with Application of Game Theory Methodology), PhD thesis.

Bolotova, Y., Connor, J.M., Miller, D.J. (2008), The impact of collusion on price behavior: Empirical Results from two Recent Cases, International Journal of Industrial Organization 26, 1290–1307.

Connor, J. (2000), Archer Daniels Midland: Price-fixer to the World, Staff paper No. 00-11, Department of Agricultural Economics, Purdue University, West Lafayette, IN.

Connor, J. (2001), Our Customers are Our Enemies: the Lysine Cartel of 1992–1995, Review of Industrial Organization 18, 5–21.

Davidson, J. (2004), Forecasting Markov-Switching Dynamic, Conditionally Heteroscedastic Processes, Statistic and Probability Letters, 68(2), 137–147. DOI:

Fong, W.M. (1998), The Dynamics of DM/Pound Exchange Rate Volatility: A SWARCH analysis, International Journal of Finance and Economics 3, 59 –71.

Fransens, P., H., van Dijk, D. (2000), Nonlinear Time Series Models in Empirical Finance, Cambridge University Press. DOI:

Haltiwanger, J., Harrington, J.E. (1991), The Impact of Cyclical Demand Movements on Collusive Behavior, RAND Journal of Economics, 22 (1991), 89–106. DOI:

Hamilton, J. D. (1989), A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle, Econometrica 57, 357–384.

Hamilton, J. D., R. Susmel (1994), Autoregressive Conditional Heteroscedasticity and Changes in Regime, Journal of Econometrics 64, 307–333. DOI:

Kośko, M., Pietrzak, M. (2007), Wykorzystanie przełącznikowych modeli typu Markowa w modelowaniu zmienności finansowych szeregów czasowych, (An Application of Markov-Switching Model for Modelling of Variability of Financial Time Series) (in) Dynamiczne Modele Ekonometryczne, Z. Zieliński (ed.), Wydawnictwo UMK, Toruń.

Krolzig, H. M. (1998), Econometric Modelling of Markov-Switching Vector Autoregressions using MSVAR for Ox, Working paper.

Lahiri, K., Whang J. G. (1994), Predicting Cyclical Turning Points with Leading Index in the Markov Switching Model, Journal of Forecasting, vol. 13, pp. 245–263.

Rotemberg, J., Saloner, G. (1986), A Supergame Theoretic Model of Business Cycles and Price Wars During Booms, American Economic Review 76, 390–407

Slade, M., E. (1992), Vancouver's Gasoline-Price Wars: An Empirical Exercise in Uncovering Supergame Strategies, Review of Economic Studies 59, 257–276.

Stawicki, J. (2004), Wykorzystanie łańcuchów Markowa w analizie rynków kapitałowych (The Markov Chains in Capital Markets Analysis), Wydawnictwo UMK, Toruń.

Włodarczyk, A., Zawada, M. (2005), Przełącznikowy model Markowa jako przykład niestacjonarnego modelu kursu walutowego (Markov Switching Model as an Example of Nonstationarity Exchange Rate Model), [in:] Dynamiczne Modele Ekonometryczne, Z. Zieliński (ed.) Wydawnictwo UMK, Toruń,

ISSN (print) 1234-3862
ISSN (online) 2450-7067

Partnerzy platformy czasopism