Collusion with intertemporal price dispersion

Nicolas de Roos and Vladimir Smirnov

No 2019-01, Working Papers from University of Sydney, School of Economics

Abstract: We develop a theory of optimal collusive intertemporal price dispersion. Dispersion clouds consumer price awareness, encouraging firms to coordinate on dispersed prices. Our theory generates a collusive rationale for price cycles and sales. Patient firms can support optimal collusion at the monopoly price. For less patient firms, monopoly prices must be punctuated with fleeting sales. The most robust structure involves asymmetric price cycles resembling Edgeworth cycles. Low consumer attentiveness enhances the effectiveness of price dispersion by reducing the payoff to deviations involving price reductions. However, for sufficiently low attentiveness, price rises are also a concern, limiting the power of obfuscation.

Keywords: Collusion; obfuscation; price dispersion. (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-com, nep-ind and nep-mic
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Citations: View citations in EconPapers (6)

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Journal Article: Collusion with intertemporal price dispersion (2020)
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