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Transparency and Competition

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Author Info
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.

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Publisher 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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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Related research
Keywords: Bertrand Oligopoly; Collusion; Competition Policy; Imperfect Information; Transparency;

Find related papers by 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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Cited by:
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  1. Morten Hviid & H. Peter Møllgaard, 2000. "Countervailing Power and Price Transparency," CIE Discussion Papers 2000-01, University of Copenhagen. Department of Economics. Centre for Industrial Economics. [Downloadable!]
    Other versions:
  2. Christian Schultz, 2002. "Transparency and Tacit Collusion in a Differentiated Market," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  3. Liliane Karlinger, 2008. "How Demand Information Can Destabilize a Cartel," Vienna Economics Papers 0803, University of Vienna, Department of Economics. [Downloadable!]
  4. KNAUFF, Malgorzata, 2006. "Market transparency and Bertrand competition," CORE Discussion Papers 2006037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  5. Boone, J. & Potters, J., 2002. "Transparency, prices, and welfare with imperfect substitutes," Discussion Paper 7, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  6. Lommerud, Kjell Erik & Sørgard, Lars, 2002. "Entry in Telecommunication: Customer Loyalty, Price Sensitivity and Access Prices," CEPR Discussion Papers 3502, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2009-12-18.

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