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Title: Explicit vs tacit collusion: The effects of firm numbers and asymmetries
Authors: Garrod, Luke
Olczak, Matthew
Keywords: Cartels
Tacit collusion
Imperfect monitoring
Capacity constraints
Issue Date: 2017
Publisher: Elsevier
Citation: GARROD, L. and OLCZAK, M., 2017. Explicit vs tacit collusion: The effects of firm numbers and asymmetries. International Journal of Industrial Organization, In Press.
Abstract: In an infinitely repeated game where firms with (possibly asymmetric) capacity constraints can make secret price cuts, we analyse the incentives for explicit collusion when firms can alternatively collude tacitly. Tacit collusion can involve price wars on the equilibrium path. Explicit collusion involves firms secretly sharing their private information to avoid such price wars, but this is illegal and runs the risk of sanctions. We find that, in contrast to the conventional wisdom but consistent with some empirical evidence, illegal cartels are least likely to arise in markets with a few symmetric firms, because tacit collusion is relatively more appealing in such markets. We discuss the implications for anti-cartel enforcement policy.
Description: This paper is in closed access until 24 months after publication.
Version: Accepted for publication
URI: https://dspace.lboro.ac.uk/2134/27366
Publisher Link: https://www.sciencedirect.com/science/journal/01677187?sdc=2
ISSN: 0167-7187
Appears in Collections:Closed Access (Economics)

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