Coordination on List Prices and Collusion in Negotiated Prices∗

A collusive practice in some intermediate goods markets is for sellers to coordinate on list prices but not final prices. We put forth a theory to explain how coordination on list prices can raise transaction prices even when all customers pay negotiated prices. Market conditions are identified that are conducive to firms profitably engaging in this form of collusive practice. The comments of Martin Peitz, Patrick Rey, and participants at the 2016 Hal White Antitrust Conference (Washington, D.C.), 2016 UBC Industrial Organization Conference (Kelowna, British Columbia), 2017 MaCCI Summer Institute in Competition Policy (Romrod, Germany), and a seminar at the Norwegian School of Economics are gratefully acknowledged, as is the extremely able research assistance of Ben Rosa and Xingtan (Ken) Zhang. The first author recognizes the financial support of the National Science Foundation (SES-1148129). Department of Business Economics & Public Policy, The Wharton School, University of Pennsylvania, Philadelphia, PA 19104, [email protected] Department of Economics, Ohio State University, Columbus, OH 43210, [email protected]