Nathan Miller, associate professor of strategy and economics, received a grant from the National Science Foundation to support his research on collusion in the beer and tuna industries. The $57,000 grant will support a graduate student in economics this year, and Miller said that he and his co-authors hope to hire two more graduate students next year.
Miller’s research analyzes the ways in which companies can cooperate to distort pricing. “The objective is to discover whether the prices that we see on the shelf reflect a competitive process, or whether the companies that make these products are finding ways to suppress competition to support higher prices,” Miller said.
Along with Matthew Weinberg, professor of economics at Ohio State University, and Gloria Sheu, a staff economist at the U.S. Department of Justice’s antitrust division, Miller is studying the practice of “price leadership” in the beer industry. Miller said that they are writing a model to describe the way two leading beer producers, Anheuser-Busch and MillerCoors, are able to raise prices without explicitly colluding by each announcing price increases far in advance and allowing the other to match the increase.
Miller also is examining price fixing in the tuna industry. Executives of Starkist and Bumblebee pled guilty to price fixing this October in response to a federal investigation into both their companies and Chicken of the Sea. Miller, Weinberg, and Marc Remer, professor of economics at Swarthmore College, are hoping to determine how far above the normal market rate the tuna industry was able to raise prices.
The economics of collusion is a relatively uncommon area of study, according to Miller, a fact for which he credits the grant he received. “The reason I think this attracted attention from the National Science Foundation is that there is a lot of academic interest in how competitive our markets are, and whether or not competition is producing the sort of economic outcomes that historically it has in this country,” he said.
“The economics literature itself has not done very much thinking rigorously about the empirical economics of collusion, so we’re trying to fill that gap to produce results and methods that can help us think about the situations in which we can rely on markets to produce reliable outcomes.”
The grant has provided funding for graduate students to help with research. Miller and his co-authors hired Minji Kim, a Georgetown doctoral student in economics, this year and are planning to hire another graduate student from Georgetown and one from Ohio State University next year.
Miller added that a draft of the working paper on the beer industry is published, and he and his co-authors are working empirical analysis of their data on the tuna industry. He hopes to finish both papers next year.