Testing the Hypothesis of Collusive Behavior Among OPEC Members.PDF

This paper presents a test to discriminate among behaviors of producers of exhaustible resources. In contrast with previous empirical studies (Griffin, 1985), which studied the static implications of such behaviors, our approach is based on the possibility of testing the dynamic implications of the behavior of the "competitive" producer versus the "collusive" producer. The behavior of a competitive producer of an exhaustible resource should follow an Euler equation. The existence markets for the fi~tures allows us to sidestep the difficult issues related to estimating future prices and demand. We use this theoretical framework to test the hypothesis of collusive behavior within OPEC between 1983 and 1991. *I wish to thank Sugato Dasgupta, Robert Pindyck, Jerry A. Hausman, and Luigi Zingales for helpful comments. Any errors are mine. 8 1997 Inter-American Development Bank 1300 New York Avenue, NW Washington, DC 20577 The views and interpretations in this document are those of the authors and should not be attributed to the Inter-American Development Bank or to any individual acting on their behalf.