Stochastic Market Sharing, Partial Communication and Collusion

Heiko Gerlach

Industrial Organization from University Library of Munich, Germany

Abstract: This paper analyzes the role of communication between firms in an infinitely repeated Bertrand game in which firms receive an imperfect private signal of a common value i.i.d. demand shock. It is shown that firms can use stochastic, inter-temporal market sharing as a perfect substitute for communication in low demand states. Therefore, partial communication in high demand states is sufficient to achieve the most collusive, full communication outcome. And partial communication in low demand state does not improve on the equilibrium without communication. Communication in high demand states allows firms to coordinate their pricing, choose the most efficient uninformed price and avoid price wars. I demonstrate that under some conditions consumers are better off with communication among colluding firms.

Keywords: Stochastic Market Sharing; Communication; Collusion; Competition Policy (search for similar items in EconPapers)
JEL-codes: D L13 L41 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2005-01-31, Revised 2006-03-23
New Economics Papers: this item is included in nep-com and nep-mic
Note: Type of Document - pdf; pages: 32
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/io/papers/0501/0501009.pdf (application/pdf)

Related works:
Journal Article: Stochastic market sharing, partial communication and collusion (2009)
Working Paper: Stochastic market sharing, partial communication and collusion (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpio:0501009

Access Statistics for this paper

More papers in Industrial Organization from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).