Tacit Collusion and Voluntary Disclosure: Theory and Evidence from the U.S. Automotive Industry
Jeremy Bertomeu (),
John Harry Evans (),
Mei Feng () and
Ayung Tseng ()
Additional contact information
Jeremy Bertomeu: Rady School of Management, University of California, San Diego, La Jolla, California 92093
John Harry Evans: Joseph M. Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania 15260
Mei Feng: Joseph M. Katz Graduate School of Business, University of Pittsburgh, Pittsburgh, Pennsylvania 15260
Ayung Tseng: Kelley School of Business, Indiana University, Bloomington, Indiana 47405
Management Science, 2021, vol. 67, issue 3, 1851-1875
Abstract:
We develop a model of voluntary disclosure and production decisions and use it to establish that firms will tacitly collude by disclosing when current market demand is low and when the decision horizon is long. Low demand helps sustain tacit collusion, because deviation from tacit collusion yields only a limited increase in profit when demand is low. Similarly, longer decision horizons give firms incentive to receive the benefits of collusion over a longer period. Using monthly production forecasts issued by the Big Three U.S. automobile manufacturers, we show that the frequency, horizon, and accuracy of the production forecasts increase when demand decreases and when the firms focus more on long-term profit. Collectively, the evidence suggests that firms use voluntary disclosures to tacitly collude. This paper was accepted by Brian Bushee, accounting.
Keywords: collusion; disclosure; automobile industry (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
https://doi.org/10.1287/mnsc.2019.3531 (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:3:p:1851-1875
Access Statistics for this article
More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().