How Demand Information Can Destabilize a Cartel
Liliane Giardino-Karlinger ()
Vienna Economics Papers from University of Vienna, Department of Economics
This paper studies a symmetric Bertrand duopoly with imperfect mon- itoring where rms receive noisy public signals about the state of demand. These signals have two opposite e ects on the incentive to collude: avoid- ing punishment after a low-demand period increases collusive pro ts, mak- ing collusion more attractive, but it also softens the threat of punishment, which increases the temptation to undercut the rival. There are cases where the latter e ect dominates, and so the collusive equilibrium does not always exist when it does absent demand information. These ndings are related to the Sugar Institute Case studied by Genesove and Mullin (2001).
JEL-codes: L13 L41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind and nep-mic
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Persistent link: http://EconPapers.repec.org/RePEc:vie:viennp:0803
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