Imperfect information, algorithmic price discrimination, and collusion

Florian Peiseler, Alexander Rasch and Shiva Shekhar

Scandinavian Journal of Economics, 2022, vol. 124, issue 2, 516-549

Abstract: We analyze the ability of firms to sustain collusion in a setting in which horizontally differentiated firms can price discriminate based on private information. Firms receive private, noisy signals regarding customers’ preferences. We find that there is a non‐monotonic relationship between signal quality and the sustainability of collusion. Starting from a low level, an increase in signal precision first facilitates collusion. There is, however, a threshold beyond which any further increase renders collusion less sustainable. Our analysis provides important insights for competition policy, particularly in light of firms’ growing reliance on increasingly sophisticated computer algorithms to analyze consumer data and to make pricing decisions. In contrast to previous findings, our results reveal that a ban on price discrimination can help to prevent collusive behavior as long as signals are sufficiently noisy.

Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1111/sjoe.12465

Related works:
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:bla:scandj:v:124:y:2022:i:2:p:516-549

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0347-0520

Access Statistics for this article

Scandinavian Journal of Economics is currently edited by Richard Friberg, Matti Liski and Kjetil Storesletten

More articles in Scandinavian Journal of Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().