Customer-side transparency, elastic demand, and tacit collusion under differentiation

Alexander Rasch and Jesko Herre

Information Economics and Policy, 2013, vol. 25, issue 1, 51-59

Abstract: Customer-side price transparency affects sustainability of collusion in a duopoly model of spatial product differentiation with elastic demand. When product differentiation is significant, more transparency facilitates collusion as measured by the critical discount factor. For the case where products are relatively homogeneous, the relationship is U-shaped. The level of transparency that optimally deters collusion is thus zero for intermediate to large degrees of product differentiation. Only when products are very moderately differentiated will full transparency be beneficial.

Keywords: Critical discount factor; Elastic demand; Horizontal product differentiation; Price transparency; Tacit collusion (search for similar items in EconPapers)
JEL-codes: L13 L41 L51 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iepoli:v:25:y:2013:i:1:p:51-59

DOI: 10.1016/j.infoecopol.2013.02.002

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