Buy-backs, Price Wars, and Collusion Enforcement∗
نویسندگان
چکیده
Recent studies of cartel operation show that in most cartels both sales and price data were private information, and side payments between firms were used in addition to price wars to enforce collusion. This paper proposes a simple mechanism for collusion enforcement that incorporates these features. The mechanism applies to both price and quantity competition, and it allows for multi-product firms. ∗We thank Joe Harrington for comments and suggestions. †School of Economics, Shanghai University of Finance and Economics, Shanghai 200433, China. E-mail: [email protected] (Chan) and [email protected] (Zhang).
منابع مشابه
Collusion enforcement with private information and private monitoring
This paper describes how a cartel may enforce a collusive agreement even when it does not observe any of the prices, sales, and costs of the firms. The underlying mechanism applies to both price and quantity competition, allows a wide class of stochastic demand systems, and can be generalized to the case of multi-market collusion. ∗An earlier version of this paper has been circulated under the ...
متن کاملDo Price Wars Facilitate Collusion? A Study of the Bromine Cartel before World War I
This paper uses documentary records of the bromine cartel from 1885 to 1914 to evaluate the contributions of noncooperative, repeated game models of collusion to our understanding of the determinants of cartel success and the causes of price wars. It finds that many of the variables that determine an industry’s ability to collude in these models—the discount rate, the information structure, the...
متن کاملTacit collusion with imperfect monitoring in the Canadian manufacturing industry: an empirical study
This article undertakes a cross-sectoral analysis of a salient empirical implication of the model of tacit collusion advanced by Abreu, Pearce, and Stachetti (1986). Specifically, we assess the prevalence of a first-order Markovian process for alternating between price wars and collusive periods through nonparametric tests. The analysis focuses on 30 different industries in Canada. The evidence...
متن کاملSustaining Collusion via a Fuzzy Trigger
Probability theory is the standard economic representation of uncertainty, although it is not always an accurate one. Fuzzy logic is an alternative representation that does not require individual beliefs regarding the explicit functional form of uncertainty. This paper applies fuzzy logic to an oligopoly trigger pricing game. The fuzzy trigger pricing game reverses the standard cyclical price w...
متن کاملTacit collusion in the presence of cyclical demand and endogenous capacity levels
We analyze tacit collusion in an industry characterized by cyclical demand and long-run scale decisions; ...rms face deterministic demand cycles and choose capacity levels prior to competing in prices. Our focus is on the nature of prices. We ...nd that two types of price wars may exist. In one, collusion can involve periods of mixed strategy price wars. In the other, consistent with the Rotemb...
متن کامل