Monday, October 11, 2010: 4:20 PM
This paper presents a theoretical and empirical analysis of price and non-price competition and collusion of firms in an oligopoly market. We use a structural econometric approach for evaluating market power as well as collusive behavior on two strategic variables, which are price and advertising. In addition to Nash and von Stackelberg (Leader-Follower) behaviors, we consider collusion on both strategic variables, as well as collusion on one variable and competition on the other. Using a unique set of data from the Turkish automobile industry from January 1991 - April 1998 we estimate alternative hypothetical market games. Our results allow us to reject the collusive hypothesis. Among the competitive market games the best form of strategic behavior is the von Stackelberg game with leadership by one firm in both price and advertising.