Faking Patience with Tacit Collusion

Elena Parilina and Alessandro Tampieri
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Elena Parilina: Saint Petersburg State University, 7/9 Universitetskaya nab., Saint Petersburg 199034, Russia

International Game Theory Review (IGTR), 2023, vol. 25, issue 02, 1-34

Abstract: This paper analyzes coordination in tacit collusion when firms’ discount factor is private information. We consider an infinitely repeated duopoly where two states of the world randomly occur, with different incentives for collusion. Depending on its own discount factor, a firm chooses cooperative behavior in both states (patient), in none of the states (impatient) or in one state (mildly patient). The presence of different states affects the strategic role of beliefs. A mildly patient firm has an incentive in “faking patience†to get the deviation profit. Interestingly, this effect prevents or delays collusion when the belief in patience is strong.

Keywords: Tacit collusion; duopoly games; unknown discount factor (search for similar items in EconPapers)
JEL-codes: C73 D43 L13 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0219198923500032

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