Tacit Collusion

Ray Rees

Oxford Review of Economic Policy, 1993, vol. 9, issue 2, 27-40

Abstract: Tacit collusion is rationalized as a non-cooperative equilibrium of a repeated game. The paper first surveys the recent game-theoretic literature on collusive equilibrium supported by threats of retaliation against deviation. It then discusses the practices which firms adopt to facilitate the achievement and maintenance of such equilibria. It concludes by relating the discussion to anti-trust policy in the U.S., U.K. and EEC. A policy based on illegality of conduct, such as that in the U.S. and EEC, is incapable of dealing effectively with tacit collusion because no overt conspiracy in involved. A policy which evaluates the economic efficiency of outcomes, whatever the conduct, is more effective. This should be taken into account in the proposed reshaping of U.K. competition policy. Copyright 1993 by Oxford University Press.

Date: 1993
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