Collusion in Markets with Imperfect Price Information on Both Sides
Christian Schultz ()
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Christian Schultz: University of Copenhagen
Review of Industrial Organization, 2017, vol. 50, issue 3, 287-301
Abstract The paper considers tacit collusion in markets that are not fully transparent on both sides. Consumers only detect prices with some probability before deciding which firm to purchase from, and each firm only detects the other firm’s price with some probability. Increasing transparency on the producer side facilitates collusion, while increasing transparency on the consumer side makes collusion more difficult. Conditions are given under which increases in a common factor that affects transparency positively on both sides are pro-competitive. With two standard information technologies, this holds when firms are easier to inform than are consumers.
Keywords: Transparency; Tacit collusion; Cartel theory; Competition policy; Internet; L13; L40 (search for similar items in EconPapers)
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