Collusion by Asymmetrically Informed Firms

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Collusion by Asymmetrically Informed Firms

Author Info

Kihlstrom, Richard
Vives, Xavier

Additional information is available for the following registered author(s):

Xavier Vives

Abstract

We analyze the implementation problem faced by firms when trying to collude in the face of asymmetric information about costs. Assuming that transfer payments are possible, we examine the incentive compatibility and individual rationality constraints that must be satisfied by any cartel agreement. Two scenarios are considered. Firms may or may not withdraw from the agreement after each firm's costs become known. If no withdrawal is possible, we find that the monopoly rule is implementable when weak types of individual rationality constraints are required. This contrasts with some results in the literature. If withdrawal is possible, we find a potential conflict between different forms of individual rationality constraints, in particular, between interim and ex post constraints. This conflict disappears in industries with a large number of firms. Copyright 1992 by MIT Press.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Economics & Management Strategy.

Volume (Year): 1 (1992)
Issue (Month): 2 (Summer)
Pages: 371-96
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Handle: RePEc:bla:jemstr:v:1:y:1992:i:2:p:371-96

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Paper
- Kihlstrom, R. & Vives, X., 1989. "Collusion By Asymmetricaly Informed Firms," UFAE and IAE Working Papers 125-89, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Michel Cavagnac, 1994. "Le 'dilemme des prisonniers' : les arguments d'une coopération en information incompléte," Annales d'Economie et de Statistique, ADRES, issue 35, pages 01, Juillet-S. [Downloadable!]
Kyle Bagwell, 2004. "Collusion and Price Rigidity," Theory workshop papers 658612000000000081, UCLA Department of Economics. [Downloadable!]
Other versions:
- Susan Athey & Kyle Bagwell & Chris Sanchirico, 2002. "Collusion and price rigidity," Discussion Papers 0102-38, Columbia University, Department of Economics. [Downloadable!]
- Susan Athey & Kyle Bagwell & Chris Sanchirico, 1998. "Collusion and Price Rigidity," Working papers 98-23, Massachusetts Institute of Technology (MIT), Department of Economics.
- Susan Athey & Kyle Bagwell & Chris Sanchirico, 2004. "Collusion and Price Rigidity," Review of Economic Studies, Blackwell Publishing, vol. 71(2), pages 317-349, 04. [Downloadable!] (restricted)
Miklos-Thal, Jeanine, 2008. "Optimal Collusion under Cost Asymmetry," MPRA Paper 11044, University Library of Munich, Germany. [Downloadable!]
Gea M. Lee, 2004. "Collusion with Internal Contracting," Econometric Society 2004 Far Eastern Meetings 693, Econometric Society. [Downloadable!]
Pouyet, J. & Verouden, V., 2000. "Cartel formation under incomplete information : on the requirements of collusion-proofness," Discussion Paper 1, Tilburg University, Center for Economic Research. [Downloadable!]
Peter Cramton & Thomas R. Palfrey, 1991. "Cartel Enforcement with Uncertainty About Costs," Papers of Peter Cramton 90ier, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998. [Downloadable!]
Other versions:
- Cramton, Peter C. & Palfrey, Thomas R., 1986. "Cartel Enforcement with Uncertainty About Costs," Working Papers 619, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
- Cramton, Peter C & Palfrey, Thomas R, 1990. "Cartel Enforcement with Uncertainty about Costs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 17-47, February. [Downloadable!] (restricted)

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