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Abstract
This article proposes a novel procedure to test whether firms compete à la Cournot or perfectly collude when firms' conduct is allowed to be heterogeneous along the conditional distribution of price–cost margins. We apply the procedure to a panel of quarterly data for 177 mobile-voice operators in 45 countries from 1999:1 to 2004:2. Particularly, we find that the hypothesis of perfect collusion can be rejected even for very high-margin operators while the hypothesis that very low-margin operators compete à la Cournot cannot be rejected.
Acknowledgements
Financial support from the Fundação para a Ciência e a Tecnologia (FCT) and from the Autoridade Nacional de Comunicações (ANACOM) is gratefully acknowledged. For useful comments and suggestions, the authors thank Santiago Budría, Michael Grajek, Harald Gruber, Paulo Guimarães, Steffen Hoernig, Reka Horvath, Eugenio Miravete and the participants in the 7th CEPR Conference on Applied Industrial Organization (Centre for Economic Policy Research), the 33rd Conference of the European Association for Research in Industrial Economics and the 1st Workshop on the Economics of ICTs.
The usual disclaimer applies. Authorship is equally shared.