Collusion with limited product comparability

Nicolas de Roos

RAND Journal of Economics, 2018, vol. 49, issue 3, 481-503

Abstract: We examine the effect of limited product comparability on the viability of collusion. Firms choose messages to influence consumer product comparison. The cartel hinders transparency on the equilibrium path and seeks it for optimal punishment. Five conditions are each sufficient to ensure obfuscation aids collusion: if firms can mix over messages or commit to messages, if messages are informative, or if an individual firm or the cartel can control comparability. We also analyze the impact of message differentiation and complexity for optimal messages, and identify a key role for the convexity or concavity of comparison probabilities in these features.

Date: 2018
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