European Business Schools Librarian's Group

Department of Economics Working Papers,
Vienna University of Economics and Business, Department of Economics

Detecting Collusion in Spatially Differentiated Markets

Matthias Firgo () and Agnes Kügler ()
Additional contact information
Matthias Firgo: WIFO - Austrian Institute of Economic Research
Agnes Kügler: Department of Economics, Vienna University of Economics and Business

Abstract: The empirical literature on mergers, market power and collusion in differentiated markets has mainly focused on methods relying on output and/or panel data. In contrast to this literature we suggest a novel approach that allows for the detection of collusive behavior among a group of firms making use of information on the spatial structure of horizontally differentiated products. By estimating best response functions using a spatial econometrics approach, we focus on differences in the strategic interaction in pricing between different groups of firms as well as on differences in price levels. We apply our method to the market for ski lift tickets using a unique data set on ticket prices and detailed resort-specific characteristics covering all ski resorts in Austria.

Keywords: tacit collusion, strategic alliances, spatial differentiation, ski lift ticket prices

JEL-codes: C21; D43; L11; L41; L83; R32 October 2014

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