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Transparency and Competition

Author

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  • Nilsson, Arvid

    (Dept. of Economics, Stockholm School of Economics)

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.

Suggested Citation

  • Nilsson, Arvid, 1999. "Transparency and Competition," SSE/EFI Working Paper Series in Economics and Finance 298, Stockholm School of Economics, revised 29 Nov 1999.
    • Handle: RePEc:hhs:hastef:0298
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    Citations

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    Cited by:

    1. 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.
    2. Swoboda, Sandra Maria, 2017. "Einfluss ausgewählter Determinanten auf die Kartellbildung und -stabilität: Eine Literaturstudie," Arbeitspapiere 176, University of Münster, Institute for Cooperatives.
    3. Boone, Jan & Pottersz, Jan, 2006. "Transparency and prices with imperfect substitutes," Economics Letters, Elsevier, vol. 93(3), pages 398-404, December.
    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. 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.
    7. Christian Schultz, 2002. "Transparency and Tacit Collusion in a Differentiated Market," CESifo Working Paper Series 730, CESifo.
    8. Nicolas de Roos, 2018. "Collusion with limited product comparability," RAND Journal of Economics, RAND Corporation, vol. 49(3), pages 481-503, September.
    9. Schultz, Christian, 2005. "Transparency on the consumer side and tacit collusion," European Economic Review, Elsevier, vol. 49(2), pages 279-297, February.
    10. Martin Obradovits & Philipp Plaickner, 2020. "Price-Directed Search and Collusion," Working Papers 2020-24, Faculty of Economics and Statistics, Universität Innsbruck.
    11. Schultz, Christian, 2004. "Market transparency and product differentiation," Economics Letters, Elsevier, vol. 83(2), pages 173-178, May.
    12. Roos, Nicolas de & Smirnov, Vladimir, 2021. "Collusion, price dispersion, and fringe competition," European Economic Review, Elsevier, vol. 132(C).
    13. Charlene Cosandier & Filomena Garcia & Malgorzata Knauff, 2018. "Price competition with differentiated goods and incomplete product awareness," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(3), pages 681-705, October.
    14. KNAUFF, Malgorzata, 2006. "Market transparency and Bertrand competition," LIDAM Discussion Papers CORE 2006037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    Keywords

    Bertrand Oligopoly; Collusion; Competition Policy; Imperfect Information; Transparency;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • 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

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