High gas prices may be explained by self-organized cartel behavior
Thursday, June 21, 2012 - 08:03
in Mathematics & Economics
(Phys.org) -- Rapid increases and unpredictable fluctuations in gas prices annoy many drivers, especially since it may seem that oil companies are secretly conspiring to keep prices high by forming a cartel in an effort to increase their profits. But a new study shows that cartel-like price dynamics of certain commodities, such as gasoline, can emerge spontaneously in a strategic model without any collusion among the sellers. The finding doesn’t necessarily mean that companies don’t intentionally form cartels, but the possibility of self-organized cartel formation could have implications for market regulations.