On Communication and Collusion-Reference-Cited by-同舟云学术

On Communication and Collusion

Published:2016-02-01 Issue:2 Volume:106 Page:285-315
ISSN:0002-8282
Container-title:American Economic Review
language:en
Short-container-title:American Economic Review

Author:

Awaya Yu¹,Krishna Vijay²

Affiliation:

1. Department of Economics, University of Rochester, 280 Hutchison Road, Rochester, NY 14627 (e-mail: )

2. Department of Economics, Penn State University, 516 Kern Building, University Park, PA 16802 (e-mail: )

Abstract

We study the role of communication within a cartel. Our analysis is carried out in Stigler’s (1964) model of repeated oligopoly with secret price cuts. 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” that result in near-perfect collusion, whereas all equilibria without such communication are bounded away from this outcome. In our model, communication improves monitoring and leads to higher prices and profits. (JEL C73, D43, D83, L12, L13, L25)

Publisher

American Economic Association

Subject

Economics and Econometrics

Link

https://pubs.aeaweb.org/doi/pdf/10.1257/aer.20141469

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