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Transparency and Competition

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  • Nilsson, Arvid

    (Dept. of Economics, Stockholm School of Economics)

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    Abstract

    This paper examines the effects of search costs on prices in a Bertrand duopoly. It is shown that if the search cost is lowered, the expected price goes down in a single play of the stage game. However, if the game is repeated it may be easier to sustain collusion the lower the search cost. In other words increased transparency may facilitate collusion even if the sellers' information is unaffected. A transitory improvement of price transparency unambiguously leads to lower prices. Hence, the model provides theoretical support for the price publication practices of consumers' councils.

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    Bibliographic Info

    Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 298.

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    Length: 22 pages
    Date of creation: 04 Feb 1999
    Date of revision: 29 Nov 1999
    Handle: RePEc:hhs:hastef:0298

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    Related research

    Keywords: Bertrand Oligopoly; Collusion; Competition Policy; Imperfect Information; Transparency;

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    Citations

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    Cited by:
    1. Boone, J. & Potters, J.J.M., 2002. "Transparency, Prices and Welfare with Imperfect Substitutes," Discussion Paper 2002-7, Tilburg University, Center for Economic Research.
    2. KNAUFF, Malgorzata, 2006. "Market transparency and Bertrand competition," CORE Discussion Papers 2006037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Lommerud, Kjell Erik & Sorgard, Lars, 2003. "Entry in telecommunication: customer loyalty, price sensitivity and access prices," Information Economics and Policy, Elsevier, vol. 15(1), pages 55-72, March.
    4. 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.
    5. Liliane Karlinger, 2008. "How Demand Information Can Destabilize a Cartel," Vienna Economics Papers 0803, University of Vienna, Department of Economics.
    6. Boone, Jan & Pottersz, Jan, 2006. "Transparency and prices with imperfect substitutes," Economics Letters, Elsevier, vol. 93(3), pages 398-404, December.
    7. Christian Schultz, 2002. "Transparency and Tacit Collusion in a Differentiated Market," CESifo Working Paper Series 730, CESifo Group Munich.
    8. Schultz, Christian, 2005. "Transparency on the consumer side and tacit collusion," European Economic Review, Elsevier, vol. 49(2), pages 279-297, February.
    9. Schultz, Christian, 2004. "Market transparency and product differentiation," Economics Letters, Elsevier, vol. 83(2), pages 173-178, May.

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