Browsing by Author "González Lira, Andrés"

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    Collusion, cyclical demand and capacity constraints : evidence from the chicken industry in Chile
    (2012) González Lira, Andrés; Bobenrieth H., Eugenio S.; Montero Ayala, Juan Pablo; Sanchez, José Miguel; Pontificia Universidad Católica de Chile. Instituto de Economía
    It is well known that cartels need to manipulate margins over the business cycle in order to enforce collusion amongst impatient firms, and that the specific evolution of these margins depends on the existence of capacity constraints. However, the literature has been largely silent about collusive pricing in presence of softer capacity constraints. We find that under a lax capacity constraint, the evolution of margins over the cycle depends on the degree of impatience of cartel's members; margins increase during booms when firms are patient and decrease when firms are impatient. This theoretical finding has relevant implications for empirical tests of collusion based on the observation of margins over the business cycle, which we discuss using an innovative test for collusion within the Chicken Industry in Chile.