Cheap Talk, Monitoring and Collusion

Many collusive agreements involve the exchange of self-reported sales data between competitors, which use them to monitor compliance with a target market share allocation. Such communication may facilitate collusion even if it is unverifiable cheap talk and underlying information becomes publicly available delay. The allow firms implement incentive-compatible reallocation mechanisms after unexpected swings, limiting recourse price wars. earn profits that could not be earned in any collusive, symmetric pure-strategy equilibrium without communication.