Market Transparency and Collusion under Imperfect Monitoring

Luke Garrod and Matthew Olczak
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Matthew Olczak: Aston Business School, Aston University

No 2017-02, Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) from Centre for Competition Policy, University of East Anglia, Norwich, UK.

Abstract: We develop a general model of a simple imperfect monitoring setting to analyse how market transparency affects collusion when price wars occur in equilibrium. We show that, despite minimal structure on the competition game and despite the usual ambiguous effect on the critical discount factor, increased consumer side transparency strictly lowers the best collusive profits. In contrast, increased producer-side transparency lowers the critical discount factor and raises the best collusive profits. Placing more structure on the competition game, we analyse these counteracting effects when market transparency affects both sides of the market.

Keywords: transparency; tacit collusion; imperfect information; price wars (search for similar items in EconPapers)
JEL-codes: D43 D80 K21 L40 (search for similar items in EconPapers)
Date: 2017-04-01
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:uea:ueaccp:2017_02

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