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Working Paper
Price ceilings as focal points for tacit collusion: evidence from credit cards
We test whether a non-binding price ceiling may serve as a focal point for tacit collusion. Our sample contains data from the credit card market during the 1980s; in the sample, most credit card issuers face a state-level interest rate ceiling, and well over half match their ceiling. Our empirical model explicitly allows for the possibility that ceilings may have been binding. The model yields evidence in favor of tacit collusion: a statistically significant proportion of issuers match their ceiling even though it is not binding. Within a state, tacit collusion is less likely as the ceiling ...
Working Paper
Compatibility and pricing with indirect network effects: evidence from ATMs
Incompatibility in markets with indirect network effects can reduce consumers? willingness to pay if they value ?mix and match? combinations of complementary network components. For integrated firms selling complementary components, incompatibility should also strengthen the demand-side link between components. In this paper, we examine the effects of incompatibility using data from a classic market with indirect network effects: Automated Teller Machines (ATMs). Our sample covers a period during which higher ATM fees increased incompatibility between ATM cards and other banks? ATM machines. ...