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Customer-side transparency, elastic demand, and tacit collusion under differentiation

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  • Rasch, Alexander
  • Herre, Jesko

Abstract

Customer-side price transparency affects sustainability of collusion in a duopoly model of spatial product differentiation with elastic demand. When product differentiation is significant, more transparency facilitates collusion as measured by the critical discount factor. For the case where products are relatively homogeneous, the relationship is U-shaped. The level of transparency that optimally deters collusion is thus zero for intermediate to large degrees of product differentiation. Only when products are very moderately differentiated will full transparency be beneficial.

Suggested Citation

  • Rasch, Alexander & Herre, Jesko, 2013. "Customer-side transparency, elastic demand, and tacit collusion under differentiation," Information Economics and Policy, Elsevier, vol. 25(1), pages 51-59.
    • Handle: RePEc:eee:iepoli:v:25:y:2013:i:1:p:51-59
    DOI: 10.1016/j.infoecopol.2013.02.002
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    Cited by:

    1. Luke Garrod & Matthew Olczak, 2021. "Supply‐ vs. Demand‐Side Transparency: The Collusive Effects Under Imperfect Public Monitoring," Journal of Industrial Economics, Wiley Blackwell, vol. 69(3), pages 537-560, September.
    2. Yiquan Gu & Alexander Rasch & Tobias Wenzel, 2016. "Price-sensitive demand and market entry," Papers in Regional Science, Wiley Blackwell, vol. 95(4), pages 865-875, November.
    3. Fischer, Christian & Rasch, Alexander, 2018. "Complex pricing and consumer-side transparency," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181642, Verein für Socialpolitik / German Economic Association.
    4. Fischer, Christian & Rasch, Alexander & Wenzel, Tobias, 2020. "Complex pricing and consumer-side attention," ZEW Discussion Papers 20-075, ZEW - Leibniz Centre for European Economic Research.
    5. Christian Schultz, 2017. "Collusion in Markets with Imperfect Price Information on Both Sides," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(3), pages 287-301, May.
    6. Francisco Martínez Sánchez, 2016. "Collusion, Customization and Transparency," Working Papers. Serie AD 2016-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    7. Rasch, Alexander & Gössl, Florian, 2016. "The scope for collusion under different pricing schemes," VfS Annual Conference 2016 (Augsburg): Demographic Change 145759, Verein für Socialpolitik / German Economic Association.
    8. Elisa Baraibar‐Diez & María D. Odriozola & José Luis Fernández Sánchez, 2017. "A Survey of Transparency: An Intrinsic Aspect of Business Strategy," Business Strategy and the Environment, Wiley Blackwell, vol. 26(4), pages 480-489, May.

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    More about this item

    Keywords

    Critical discount factor; Elastic demand; Horizontal product differentiation; Price transparency; Tacit collusion;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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