Stochastic market sharing, partial communication and collusion

Heiko Gerlach

International Journal of Industrial Organization, 2009, vol. 27, issue 6, 655-666

Abstract: This paper analyzes the role of communication between firms in an infinitely repeated Bertrand game in which firms receive private signals of a common value i.i.d. demand shock. It is shown that firms can use stochastic, inter-temporal market sharing as a substitute for communication in low demand states. Partial communication in high demand states is sufficient to achieve the most collusive, full communication outcome and strictly dominates partial communication in low demand states. Communication in high demand states allows firms to coordinate their pricing, choose the most efficient uninformed price and avoid price wars. I demonstrate that under some conditions consumers are better off with communication among colluding firms.

Keywords: Stochastic; market; sharing; Communication; Collusion; Competition; policy (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Stochastic market sharing, partial communication and collusion (2007)
Working Paper: Stochastic Market Sharing, Partial Communication and Collusion (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:27:y:2009:i:6:p:655-666

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