Collusion, price dispersion, and fringe competition

Nicolas de Roos and Vladimir Smirnov

European Economic Review, 2021, vol. 132, issue C

Abstract: We study the optimal behaviour of a cartel faced with fringe competition and imperfectly attentive consumers. Intertemporal price dispersion obfuscates consumer price comparison which aids the cartel through two channels: it reduces the effectiveness of free riding by the fringe; and it relaxes the cartel’s internal incentive constraints. Our theory explains the survival of a price-setting cartel in a homogeneous product market, provides a collusive rationale for sales and Edgeworth cycles, and characterises the cartel’s manipulation of its fringe rival through a double cut-off rule.

Keywords: Collusion; Fringe competition; Obfuscation; Price dispersion (search for similar items in EconPapers)
JEL-codes: D83 L13 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Collusion, price dispersion, and fringe competition (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:132:y:2021:i:c:s0014292120302701

DOI: 10.1016/j.euroecorev.2020.103640

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