Diagnostic system for cooperative pricing detection in retail markets

The article is devoted to the research and development of a diagnostic system for detecting signs of cooperative pricing in retail markets. We consider methods and algorithms for successively identifying the presence of market power, as well as signs of abuse of this power. Five components of the diagnostic system are distinguished: dominance, concentration based on market shares, concentration based on market prices, general cooperation and episodic (or seasonal) cooperation. As a basic concept for the detecting of cooperative behavior, we used conjectural variations approach. In our opinion, it uses a relatively small number of a priori assumptions about interactions between market agents, which is important for empirical research. Mathematical models are considered for calculating the level of cooperation, allowing to analyze the degree of use of market power in a static and dynamic aspects. The proposed diagnostic system can be used by government, antitrust and regulatory authorities to monitor the level of competition in retail markets and identify signs of price cooperation. In turn, the same methods can also help market agents to analyze their pricing policy, to prove the fact of fair competitive behavior and to adjust pricing in a timely manner.