Supply‐ vs. Demand‐Side Transparency: The Collusive Effects Under Imperfect Public Monitoring

Luke Garrod and Matthew Olczak

Journal of Industrial Economics, 2021, vol. 69, issue 3, 537-560

Abstract: We analyse how market transparency affects collusion under imperfect monitoring where punishment phases occur on the equilibrium path. We show that increased transparency causes a ‘pro‐competitive’ demand‐side effect and an ‘anti‐competitive’ supply‐side effect on the optimal symmetric perfect public equilibrium (SPPE) profits. When transparency increases on both sides of the market, the optimal SPPE profits unambiguously increase at the perfect monitoring limit, because the pro‐competitive demand‐side effect vanishes. This result holds even when there is minimal structure on the competition game. The supply‐side effect also dominates away from the limit under reasonable conditions. We draw conclusions for policy.

Date: 2021
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