Garrod_Firm+Numbers+and+Asymmetries.pdf (659.62 kB)
Explicit vs tacit collusion: The effects of firm numbers and asymmetries
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.
History
School
- Business and Economics
Department
- Economics
Published in
International Journal of Industrial OrganizationVolume
56Pages
1 - 25Citation
GARROD, L. and OLCZAK, M., 2017. Explicit vs tacit collusion: The effects of firm numbers and asymmetries. International Journal of Industrial Organization, 56, pp. 1-25.Publisher
© ElsevierVersion
- AM (Accepted Manuscript)
Publisher statement
This paper was accepted for publication in the journal International Journal of Industrial Organization and the definitive published version is available at https://doi.org/10.1016/j.ijindorg.2017.10.006.Acceptance date
2017-10-24Publication date
2017-11-11ISSN
0167-7187Publisher version
Language
- en