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Profiteering and the degree of monopoly in the great recession
OAI: oai:purehost.bath.ac.uk:publications/5bbafb2e-2628-42b4-8c2a-257056787a61
Abstract
While the onset of recession may lead some oligopolistic firms to
engage in price-cutting behavior, we argue this is likely to be only a temporary phenomenon. As the recession deepens, firms will find themselves with (unplanned)
excess capacity, which will increase the mutual benefits of collusion and hence the degree of monopoly is likely to rise. To support this proposition, and adopting a largely heterodox framework, we consider some historical evidence and present some recent data for both U.S. and UK manufacturing and UK retail during the current prolonged slump that has been labeled the “Great Recession.” Such behavior has significant implications for economic recovery.
engage in price-cutting behavior, we argue this is likely to be only a temporary phenomenon. As the recession deepens, firms will find themselves with (unplanned)
excess capacity, which will increase the mutual benefits of collusion and hence the degree of monopoly is likely to rise. To support this proposition, and adopting a largely heterodox framework, we consider some historical evidence and present some recent data for both U.S. and UK manufacturing and UK retail during the current prolonged slump that has been labeled the “Great Recession.” Such behavior has significant implications for economic recovery.