A Supergame-Theoretic Model of Price Wars during Booms.

S-Tier
Journal: American Economic Review
Year: 1986
Volume: 76
Issue: 3
Pages: 390-407

Authors (2)

Rotemberg, Julio J Saloner, Garth (not in RePEc)

Score contribution per author:

4.022 = (α=2.01 / 2 authors) × 4.0x S-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

This paper studies implicitly colluding oligopolists facing fluctuatingdemand. The credible threat of future punishments provides the discipline that facilitates collusion. However, the authors find that the temptation to unilaterally deviate from the collusive outcome is often greater when demand is high. To moderate this temptation, the optimizing oligopoly reduces its profitability at such times, resultingin lower prices. The behavior of the railroads in the 1880s, the automobile industry in the 1950s, the cyclical behavior of cement prices, and of price-cost margins are consistent with this theory. Thereduction of price by the oligopolistic sectors may have macro consequences. Copyright 1986 by American Economic Association.

Technical Details

RePEc Handle
repec:aea:aecrev:v:76:y:1986:i:3:p:390-407
Journal Field
General
Author Count
2
Added to Database
2026-01-29