A Variance Screen For Collusion

Authors:
Rosa M. Abrantes-Metz, Luke M. Froeb, John F. Geweke, Christopher T. Taylor
Working Paper:
275
In this paper, we examine price movements over time around the collapse of a bid-rigging conspiracy. While the mean decreased by sixteen percent, the standard deviation increased by over two hundred percent. We hypothesize that conspiracies in other industries would exhibit similar characteristics and search for “pockets” of low price variation as indicators of collusion in the retail gasoline industry in Louisville. We observe no such areas around Louisville in 1996-2002.