Communication in Cartels∗
نویسندگان
چکیده
We study the role of communication within a cartel. Our analysis is carried out in Stigler’s (1964) model of oligopoly with secret price cuts. This is a repeated game with private monitoring since in the model, firms observe neither the prices nor the sales of their rivals. For a fixed discount factor, we identify conditions under which there are equilibria with "cheap talk" communication that result in near-perfect collusion– profits are close to those of a monopolist– whereas all equilibria without such communication are bounded away from this outcome. Thus, in our model, communication leads to higher prices and profits. JEL classification: C73, D43
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