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Title: |
Asymmetry in the Response of Price-Cost Margins to the Level of Demand
across Booms and Slumps: The Case of U.S. Industries |
| Author: |
Lee, In Kwon |
| Author
Affiliation: |
Korea Econ Research Institute |
| Source: |
International Economic Journal, Winter 2001, v. 15, no. 4, pp. 47-58 |
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Publication Date: |
Winter 2001 |
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Abstract: |
Haltiwanger and Harrington (1991) reveal
that, while the gain from deviating from a collusive agreement in an
oligopolistic industry is greatest during booms, it is most difficult to
collude during recessions since foregone profits inflicted on defection
arc relatively low in recessions. Their numerical simulations show that
firms price more counter-cyclically during recessions than during booms
to deter relatively greater incentive to defect in recession. This paper
tests for a potential asymmetry in the response of margins to the level
of demand across booms and slumps, using panel data covering 180 U.S.
four-digit level SIC manufacturing industries over the 1963-1987 period.
The principal findings accept this theoretical prediction. |
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