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Collusion Theory: Where to Go Next?

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  • Luís Cabral

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Abstract

This note comments on Feuerstein's (Feuerstein, Switgard, “Collusion in industrial economics: A survey,” forthcoming in Journal of Industry, Competition and Trade, 2005) survey of collusion theory. I start by presenting evidence from a recent real-world collusion case: the lysine industry. Based on this, I point out a few areas where collusion theory can improve: (a) the problem of equilibrium choice (bargaining over each firm's share), which is especially important in asymmetric oligopolies; (b) the problem of equilibrium implementation, including in particular communication in an asymmetric information context; and (c) the relation between price wars and collusion. I conclude with a few notes on policy issues, namely leniency programs and cartel detection strategies. Copyright Springer Science + Business Media, Inc. 2005

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Bibliographic Info

Article provided by Springer in its journal Journal of Industry, Competition and Trade.

Volume (Year): 5 (2005)
Issue (Month): 3 (December)
Pages: 199-206

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Handle: RePEc:kap:jincot:v:5:y:2005:i:3:p:199-206

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Web page: http://springerlink.metapress.com/link.asp?id=105724

Related research

Keywords: collusion; cartels; public policy;

References

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  1. Fudenberg, Drew & Levine, David I & Maskin, Eric, 1994. "The Folk Theorem with Imperfect Public Information," Econometrica, Econometric Society, vol. 62(5), pages 997-1039, September.
  2. Joseph E Harrington & Jr Andrzej Skrzypacz, 2004. "Collusion under Monitoring of Sales," Economics Working Paper Archive 509, The Johns Hopkins University,Department of Economics, revised Mar 2005.
  3. Michihiro Kandori & Hitoshi Matsushima, 1998. "Private Observation, Communication and Collusion," Econometrica, Econometric Society, vol. 66(3), pages 627-652, May.
  4. Susan Athey & Kyle Bagwell, 2004. "Collusion with Persistent Cost Shocks," Levine's Bibliography 122247000000000334, UCLA Department of Economics.
  5. Abrantes-Metz, Rosa M. & Froeb, Luke M. & Geweke, John & Taylor, Christopher T., 2006. "A variance screen for collusion," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 467-486, May.
  6. Heski Bar-Isaac & Mariagiovanna Baccara, 2006. "How to Organize Crime," Working Papers 06-07, New York University, Leonard N. Stern School of Business, Department of Economics.
  7. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
  8. Paul Milgrom & John Roberts, 1980. "Predation, Reputation, and Entry Deterrence," Discussion Papers 427, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Baldwin, Laura H & Marshall, Robert C & Richard, Jean-Francois, 1997. "Bidder Collusion at Forest Service Timber Sales," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 657-99, August.
  10. Robert Porter, 2005. "Detecting Collusion," Review of Industrial Organization, Springer, vol. 26(2), pages 147-167, December.
  11. Robert H. Porter & J. Douglas Zona, 1992. "Detection of Bid Rigging in Procurement Auctions," NBER Working Papers 4013, National Bureau of Economic Research, Inc.
  12. Mariagiovanna Baccara & Heski Bar-Isaac, 2008. "How to Organize Crime -super-1," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1039-1067.
  13. Athey, Susan & Bagwell, Kyle, 2001. "Optimal Collusion with Private Information," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 428-65, Autumn.
  14. Fershtman, Chaim & Pakes, Ariel, 2005. "Finite State Dynamic Games with Asymmetric Information: A Framework for Applied Work," CEPR Discussion Papers 5024, C.E.P.R. Discussion Papers.
  15. Meghan Busse, 2002. "Firm Financial Condition and Airline Price Wars," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 298-318, Summer.
  16. Green, Edward J. & Porter, Robert H., 1982. "Noncooperative Collusion Under Imperfect Price Information," Working Papers 367, California Institute of Technology, Division of the Humanities and Social Sciences.
  17. Luís M. B. Cabral, 2000. "Introduction to Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032864, December.
  18. Switgard Feuerstein, 2005. "Collusion in Industrial Economics—A Survey," Journal of Industry, Competition and Trade, Springer, vol. 5(3), pages 163-198, December.
  19. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, vol. 56(2), pages 383-96, March.
  20. Meghan R. Busse, 2002. "Firm Financial Condition and Airline Price Wars," Yale School of Management Working Papers ysm281, Yale School of Management.
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Cited by:
  1. Switgard Feuerstein, 2005. "Collusion in Industrial Economics—A Rejoinder," Journal of Industry, Competition and Trade, Springer, vol. 5(3), pages 235-239, December.

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