Stochastic market sharing, partial communication and collusion

Heiko Gerlach

No D/674, IESE Research Papers from IESE Business School

Abstract: This paper analyzes the role of communication between firms in an infinitely repeated Bertrand game in which firms receive an imperfect private signal of a common value i.i.d. demand shock. It is shown that firms can use stochastic, inter-temporal market sharing as a perfect substitute for communication in low-demand states. Therefore, partial communication in high-demand states is sufficient to achieve the most collusive, full communication outcome. And partial communication in low-demand states does not improve on the equilibrium without communication. 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)
JEL-codes: D82 L13 L41 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2007-01-21
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.iese.edu/research/pdfs/DI-0674-E.pdf (application/pdf)

Related works:
Journal Article: Stochastic market sharing, partial communication and collusion (2009)
Working Paper: Stochastic Market Sharing, Partial Communication and Collusion (2006)
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:ebg:iesewp:d-0674

Access Statistics for this paper

More papers in IESE Research Papers from IESE Business School IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN. Contact information at EDIRC.
Bibliographic data for series maintained by Noelia Romero ().