Stochastic Market Sharing, Partial Communication and Collusion

Heiko Gerlach ()

Industrial Organization from EconWPA

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: L41 L13 D (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-mic
Date: 2005-01-31, Revised 2006-03-23
Note: Type of Document - pdf; pages: 32
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http://129.3.20.41/eps/io/papers/0501/0501009.pdf (application/pdf)

Related works:
Working Paper: Stochastic market sharing, partial communication and collusion (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0501009

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