Evidence of the Collusion in the Russian Telecommunications Industry

The present diploma paper concentrated on the analysis of the collusion in the Russian telecommunications industry. Russian Telecom has always been under the suspicion of possible cooperative actions between its main players. Through the Porter (1979)’s Five Forces analysis in the beginning of the present paper the theoretical grounds for collusion in the selected market were determined. The research was aimed to first determine the collusive periods and then test the applicability of the assumption of Green & Porter(1984) model in characterizing the collusive behavior. The goal of the study was achieved through the use of econometric tools. My research paper uses the Markov Switching regression model of Hamilton (1989) to estimate the collusive periods. After the collusive periods were determined using the Markov switching for two regimes in Eviews, the estimated coefficients of two regressions were analyzed. In order to test the assumption of Green & Porter (1984) that the collusive behavior is somewhere between the Bertrand behavior and the one of joint monopoly, the parameter θ was estimated. In my case it was very close to unity, meaning that the behavior is very close to Bertrand. That result was expected, as the switching model marginally indicated only three collusive periods. It is not likely to be true. As the result, I cannot make any relevant conclusions on the second testes assumption of Green & Porter (1984), which corresponds to the connection between price wars and negative demand shocks. Nevertheless, I determined some significant variables representing the negative shifts in the economy. These variables showed a negative effect on the prices.